Imperial College London
Alternate

ProfessorWilliamKnottenbelt

Faculty of Engineering, Department of Computing

Professor of Applied Quantitative Analysis
 
 
 
//

Contact

 

+44 (0)20 7594 8331w.knottenbelt Website

 
 
//

Location

 

E363ACE ExtensionSouth Kensington Campus

//

Summary

 

Publications

Citation

BibTex format

@inproceedings{Koutsouri:2021:10.1109/ICBC51069.2021.9461107,
author = {Koutsouri, A and Petch, M and Knottenbelt, W},
doi = {10.1109/ICBC51069.2021.9461107},
pages = {1--9},
publisher = {IEEE},
title = {Diversification benefits of commodities for cryptoasset portfolios},
url = {http://dx.doi.org/10.1109/ICBC51069.2021.9461107},
year = {2021}
}
Download

RIS format (EndNote, RefMan)

TY  - CPAPER
AB  - The  aim  for  balance  between  risk  and  reward  in investment  portfolios  often  requires  studying  the  diversification contribution of its constituents. This objective requires to specify whether  investors  can  extend  their  exposure  in  certain  asset classes  and  benefit  their  portfolios  in  a  statistically  significant way. In this paper, we address this issue of diversification in the context of cryptoasset portfolios and examine whether their risk-adjusted performance can be enhanced through seeking exposure into the commodities class. For an equally-weighted portfolio of five cryptoassets, we first consider the addition of physical gold, as conceptualised by the CoinShares Gold and Cryptoassets Index, a diversified, monthly-rebalanced index that seeks exposure to both asset classes. We further consider modifying the index composition by replacing physical gold with a basket of five commodities. Mean-variance spanning tests reveal that the addition of physical gold in the original cryptoasset portfolio translates to a significant shift in the efficient frontier, both in terms of the global minimum variance  and  the  tangency  portfolios.  Additionally,  expanding the   exposure   in   the   commodity   side   confirms   a   statistically significant  improvement,  with  the  diversification  benefit  arising from  a  shift  in  the  tangency  portfolio.  We  further  generate a  number  of  price  paths  for  the  original  index,  the  modified index and their components, according to a Dynamic Conditional Correlation GARCH specification, to assess the efficiency of the index  weighted  risk  contribution  scheme.  Results  demonstrate a   superior   performance   of   the   two   indices   when   compared against their constituents in terms of Omega ratio. The modified index  appears  more  appropriate  for  investors  that  seek  higher annual  returns,  while  the  original  composition  would  be  more appropriate for individuals with mod
AU  - Koutsouri,A
AU  - Petch,M
AU  - Knottenbelt,W
DO  - 10.1109/ICBC51069.2021.9461107
EP  - 9
PB  - IEEE
PY  - 2021///
SP  - 1
TI  - Diversification benefits of commodities for cryptoasset portfolios
UR  - http://dx.doi.org/10.1109/ICBC51069.2021.9461107
UR  - http://hdl.handle.net/10044/1/88212
ER  -
Download