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@article{Koutsouri:2021:10.21428/58320208.ddba2ded,
author = {Koutsouri, A and Petch, M and Knottenbelt, W},
doi = {10.21428/58320208.ddba2ded},
journal = {Cryptoeconomic Systems},
title = {Performance of the CoinShares Gold and Cryptoassets Index under different market regimes},
url = {http://dx.doi.org/10.21428/58320208.ddba2ded},
volume = {1},
year = {2021}
}

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TY  - JOUR
AB  - Regime-switching   models   are   frequently   used   to explain   the   tendency   of   financial   markets   to   change   their behavior,   often   abruptly.   Such   changes   usually   translate   to structural  breaks  in  the  average  means  and  volatilities  of  financial  indicators,  and  partition  their  time-series  into  distinct segments,  each  with  unique  statistical  properties.  In  this  paper, we  address  the  problem  of  identifying  the  presence  of  such regimes in the constituents of diversified, cryptoasset-containing portfolios,  ultimately  to  define  high-risk  market  conditions  and assess  portfolio  resilience.  For  each  portfolio  component,  we   first  consider  a  Gaussian  Hidden  Markov  Model  (HMM)  in order to extract intermediate trend-related states, conditional on the  weekly  returns  distributions.  We  further  apply  a  Markov-switching   GARCH   model   to   the   demeaned   daily   returns   to describe changes in the conditional variance dynamics and isolate volatility-related  states.  We  combine  the  former  approaches  to generate a number of price paths for each constituent, simulate the portfolio allocation strategy and obtain a risk profile for each combination  of  the  trend  and  volatility  regimes.  We  apply  the proposed method to the CoinShares Gold and Cryptoassets Index, a diversified, monthly-rebalanced index which includes two main risk-weighted  components;  a  cryptoassets  basket  and  physical gold.  Results  demonstrate  an  overall  stable  risk-reward  profile when  compared  against  the  individual  components  and  suggest a  superior  performance  in  terms  of  Omega  ratio  for  investors that target wealth preservation and moderate annual returns. We detect  underperformance  regions  in  bear-low  volatility  market regimes,  where  diversification  is  hindered.
AU  - Koutsouri,A
AU  - Petch,M
AU  - Knottenbelt,W
DO  - 10.21428/58320208.ddba2ded
PY  - 2021///
TI  - Performance of the CoinShares Gold and Cryptoassets Index under different market regimes
T2  - Cryptoeconomic Systems
UR  - http://dx.doi.org/10.21428/58320208.ddba2ded
UR  - https://cryptoeconomicsystems.pubpub.org/pub/koutsouri-cgci-performance/release/3
UR  - http://hdl.handle.net/10044/1/87152
VL  - 1
ER  -

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