Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/148874
Authors: 
Elendner, Hermann
Trimborn, Simon
Ong, Bobby
Lee, Teik Ming
Year of Publication: 
2016
Series/Report no.: 
SFB 649 Discussion Paper 2016-038
Abstract: 
Crypto-currencies have developed a vibrant market since bitcoin, the rst crypto-currency, was created in 2009. We look at the properties of cryptocurrencies as financial assets in a broad cross-section. We discuss approaches of altcoins to generate value and their trading and information platforms. Then we investigate crypto-currencies as alternative investment assets, studying their returns and the co-movements of altcoin prices with bitcoin and against each other. We evaluate their addition to investors' portfolios and document they are indeed able to enhance the diversification of portfolios due to their little co-movements with established assets, as well as with each other. Furthermore, we evaluate pure portfolios of crypto-currencies: an equallyweighted one, a value-weighted one, and one based on the CRypto-currency IndeX (CRIX). The CRIX portfolio displays lower risk than any individual of the liquid crypto-currencies. We also document the changing characteristics of the crypto-currency market. Deepening liquidity is accompanied by a rise in market value, and a growing number of altcoins is contributing larger amounts to aggregate crypto-currency market capitalization.
Subjects: 
Index construction
CRIX
information criteria
model selection
AIC
BIC
market analysis
bitcoin
cryptocurrency
Document Type: 
Working Paper

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