A Study of the Impact of Crypto Assets on Portfolio Risk Management (2019–2022)

In this study, we examined the impact of crypto assets on the risk-return characteristics of portfolios consisting of traditional assets. First, we examined the optimal portfolio for maximising the Sharpe ratio and found that the Sharpe ratio improves when CMC Crypto 200 Index (CMC) are incorporated to a certain extent into a portfolio consisting of traditional stocks, bonds and commodity indices. In addition, we focused on individual assets comprising crypto assets instead of CMC and incorporated individual crypto assets into a portfolio of conventional traditional assets and found that the Sharpe ratio improved for the majority of individual crypto assets. This is an interesting result as it indicates that crypto assets may contribute to improving the risk-return characteristics of the portfolio. Second, we examined the optimal portfolio for minimising volatility and found that the percentage of crypto assets held was small. This may be due to the fact that the volatility of crypto assets is higher than that of other assets. In this sense, investing in cryptocurrencies is not suitable for investors who want to keep volatility low. JEL Codes: G10, G11, G12