Bitcoin and Portfolio Diversification: A Portfolio Optimization Approach

Bakry, Walid; Khaki, Audil Rashid; Al-Mohamad, Somar; Elkanj, Nasser

doi:10.3390/jrfm14070282

Cited by 33 publications

(22 citation statements)

References 83 publications

(131 reference statements)

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“…Additionally, the trading volume increased during the COVID-19 pandemic contrary to expectation even to the point that there is suspicion of a possible price bubble (Guegan & Frunza, 2020). Also, during the COVID-19 pandemic, the Bitcoin Investment Management and Financial Innovations, Volume 18, Issue 4, 2021 http://dx.doi.org/10.21511/imfi.18 (4).2021. 19 has seen its value increase while other traditional financial assets and commonly traded commodities have seen their value plummet.…”

Section: Introductionmentioning

confidence: 94%

“…Investment Management and Financial Innovations, Volume 18, Issue 4, 2021 http://dx.doi.org/10.21511/imfi.18 (4).2021. 19 possible sources of market systemic shock transmission to test their effect on the unique risk of Bitcoin (BTC) before and during the ongoing COVID-19 pandemic.…”

Section: Conflict Of Interest Statement: Author(s) Reported No Conflict Of Interestmentioning

confidence: 99%

“…It was found that, in most periods of extreme market conditions under analysis, Bitcoin would fall under the "weak" safe haven asset classification. On the empirical side, and different periods, the evidence suggests that Bitcoin can act as a diversifier under time-varying conditions (Bakry et al, 2021;Carpenter, 2016;Eisl et al, 2015). On a different setting, and using a portfolio composed of investment-grade bonds and global industry stock, Akhtaruzzaman et al (2020) found that Bitcoin acted as a diversifier for these kinds of assets.…”

Section: Introductionmentioning

confidence: 99%

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Impact of commodities and global stock prices on the idiosyncratic risk of Bitcoin during the COVID-19 pandemic

Fallon¹,

Sarmiento

2021

Investment Management and Financial Innovations

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In times of exogenous systemic shocks, such as the COVID-19 pandemic, it is important to identify hedge or safe haven assets. Therefore, this paper analyzes changes in the idiosyncratic risk of Bitcoin in a portfolio of commodities and global stocks. For this purpose, the M-GARCH model employed considers the interdependence among all the portfolio assets by using a time-varying asset pricing framework. This framework measures the impact of commodities and global stock prices as sources of systemic risk for Bitcoin returns before and after the COVID-19 pandemic. The evidence suggests that during the COVID-19 pandemic, the effects of changes in commodities and global prices on the idiosyncratic risk of Bitcoin were statistically significant. The idiosyncratic risk of Bitcoin measured as a percentage of total variance not accounted for by the proposed model rose from 86.06% to 95.05% during the pandemic. These results are in line with previous studies regarding the properties of Bitcoin as a hedge or safe haven asset for a portfolio composed of commodities and global stocks.

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Section: Introductionmentioning

confidence: 94%

Section: Conflict Of Interest Statement: Author(s) Reported No Conflict Of Interestmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Impact of commodities and global stock prices on the idiosyncratic risk of Bitcoin during the COVID-19 pandemic

Fallon¹,

Sarmiento

2021

Investment Management and Financial Innovations

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“…This movement is chosen if the generated random number is higher than the third threshold. This process is formalized by using (7). This movement is conducted to exploit the location near the global best.…”

Section: Proposed Modelmentioning

confidence: 99%

“…In transportation and logistics, optimization is implemented in route planning [5], storage management [6], and so on. Optimization is also implemented in finance, such as in portfolio optimization [7], option pricing [8], credit risk assessment [9], bankruptcy mitigation [10], etc.…”

Section: Introductionmentioning

confidence: 99%

Hybrid Pelican Komodo Algorithm

Kusuma¹,

Dinimaharawati²

2022

IJACSA

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In this work, a new metaheuristic algorithm, namely the hybrid pelican Komodo algorithm (HPKA), has been proposed. This algorithm is developed by hybridizing two shortcoming metaheuristic algorithms: the Pelican Optimization Algorithm (POA) and Komodo Mlipir Algorithm (KMA). Through hybridization, the proposed algorithm is designed to adapt the advantages of both POA and KMA. Several improvisations regarding this proposed algorithm are as follows. First, this proposed algorithm replaces the randomized target with the preferred target in the first phase. Second, four possible movements are selected stochastically in the first phase. Third, in the second phase, the proposed algorithm replaces the agent's current location with the problem space width to control the local problem space. This proposed algorithm is then challenged to tackle theoretical and real-world optimization problems. The result shows that the proposed algorithm is better than grey wolf optimizer (GWO), marine predator algorithm (MPA), KMA, and POA in solving 14, 12, 14, and 18 functions. Meanwhile, the proposed algorithm creates 109%, 46%, 47%, and 1% better total capital gain rather than GWO, MPA, KMA, and POA, respectively in solving the portfolio optimization problem.

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