Journal of Finance and Accounting
Volume 5, Issue 6, November 2017, Pages: 229-238
Received: Jan. 30, 2018;
Published: Mar. 9, 2018
Views 1571 Downloads 91
Yanuar Andrianto, Management Department, PPM School of Management, Jakarta, Indonesia
Yoda Diputra, Management Department, PPM School of Management, Jakarta, Indonesia
The emergence of financial technology in the last 10 years has created a new type of asset that is Cryptocurrency. Cryptocurreny offers a small transaction fee without involving a third party in its transaction and the ability to make its users anonymous. It became one of its main selling points and was quickly accepted widely in the financial world. Cryptocurrency price movements become volatile. For examples, Bitcoin issued in 2009, the value is not more than USD 10, but in early June 2017, Bitcoin is worth about USD 3000 (Bloomberg, July 5th, 2017). Many investors are interested to invest in Cryptocurrency, especially investors with high risk tolerance. This study aims to find the effects of Cryptocurrency on well-formed portfolios. The assets we use are Foreign Currency, Commodity, Stock, and ETF. The Cryptocurrency we will use is Bitcoin, Ripple and Litecoin. Using the Modern Portfolio Theory approach, we can create an investment portfolio. The results show that the portfolio with Cryptocurrency indeed increases the effectiveness of the portfolio in two ways. The first is to minimize the standard deviation and the second is to create more allocation options for investors to choose from. The optimum allocation of Cryptocurrency is from 5% to 20% depending on the risk tolerance of the investor.
The Effect of Cryptocurrency on Investment Portfolio Effectiveness, Journal of Finance and Accounting.
Vol. 5, No. 6,
2017, pp. 229-238.
Baur. D. G, Hong. K, Lee. A. D, “Virtual Currencies: Media Of Exchange or Speculative Asset?”, June 2016.
Bloomberg. https://www.bloomberg.com/news/articles/2017-09-18/bitcoin-roars-back-from-chinese-regulation-spurred-swoon. September 2017.
Brander, K, Cryptocurrency – the new global financial crisis?, 2014.
Chris. B and Adam. W, “Bitcoin: Ringing The Bell For New Asset Class”, 2016.
Christodoulakis, G. A. “Bayesian Optimal Portfolio Selection: the BlackLitterman Approach.” November 2002.
Ciaian, P, Rajcaniova, M, Kancs, A, “The Economics of BitCoin Price Formation”, 2015.
Delaney, J, Buchholz, M, Warren, J and Parker, J, “Bits and bets information, price volatility, and demand for bitcoin”, 2012.
Dewi, D. A and Soekarno, S, “Alternative Investments Evaluation of Bitcoins, Gold and LQ45 Index”, 2014.
Dwyer, Gerald P., The Economics of Bitcoin and Similar Private Digital Currencies, 2014.
Eisl. A, Gasser. S, M, Weinmayer, K. “Caveat Emptor: Does Bitcoin Improve Portfolio Diversification?” June 3, 2015.
Elton. E and Martin. G, Modern Potfolio Theory and Investment Analysis, John Wilet & Sons. Inc, Canada, 1991.
Gandal, N, and Halaburda, H, “Can We Predict the Winner in a Market with Network Effects? Competition in Cryptocurrency Market”, 7 Juli 2016.
Hartono, Jogiyanto. Teori Portofolio dan Analisis Investasi. Edisi Ketujuh. Yogyakarta:BPFE. 2010.
Homeland Security Studies And Analysis Institute, “Risks And Threats Of Cryptocurrencies”, December 31, 2014.
Huhtinen, T. P, “Bitcoin as a monetary system: Examining attention and attendance”, 2014.
Jones, Charles, P. Investment: Analysis and Management (7th Edition). USA: Wiley & Son, Inc. 2000.
Kelly, M “Best Practice For Bitcoins Regulatory, Legal And Financial Approaches To Virtual Currencies In A Hesitant, Global Environment”, 2014.
Kim YB, Kim JG, Kim W, Im JH, Kim TH, Kang SJ, “Predicting Fluctuations in Cryptocurrency Transactions Based on User Comments and Replies”, 2016.
Kristoufek, L, “What are the main drivers of the bitcoin price? evidence from wavelet coherence analysis”, 2014.
Kristoufek, L, “Bitcoin meets google trends and wikipedia: Quantifying the relationship between phenomena of the internet era”, Nature, 0.1038, 2014.
Lew. A, Mills. W, “Identifying Active Trading Strategies in the Bitcoin Market”, 2014.
Markowitz, H. M. “Portfolio Selection.” The Journal of Finance, March 1952.
Matsumoto, T, Iwamura, M, Kitamura, Y, “Is bitcoin the only Cryptocurrency in the town? economics of Cryptocurrency and friedrich a. hayek”, Institute of Economic Research Hitotsubashi University, 2014.
Mavrodiev, P, Garcia, D, Tessone, C. J, and Perony, N, “The digital traces of bubbles: feedback cycles between socio-economic signals in the bitcoin economy”, ETH Risk Center, 2014.
Sneppen, K, and Bornholdt, S, “Do bitcoins make the world go round? on the dynamics of competing crypto-currencies”, 2014.
Vivian, W and Vandey, P, “The Value of Bitcoin in Enhancing the Efficiency of an Investor’s Portfolio”, Journal of Financial Planning, September 2014.
William, S. F, "The Sharpe ratio" The Journal of Portfolio Management, 1994.
Yermack, D. “Is Bitcoin a Real Currency”? NYU Stern School of Business, 2013.