TITLE:
Cryptocurrencies and Investment Diversification: Empirical Evidence from Seven Largest Cryptocurrencies
AUTHORS:
Nguyen Phuc Canh, Nguyen Quang Binh, Su Dinh Thanh
KEYWORDS:
Cryptocurrency, Economic Factors, Systematic Risk
JOURNAL NAME:
Theoretical Economics Letters,
Vol.9 No.3,
March
6,
2019
ABSTRACT:
The study examines the diversification capability of
seven cryptocurrencies with the largest market size against risks from economic
factors as oil price, gold price, interest rate, USD strength, and S&P500.
Using the weekly data of Bitcoin, Litecoin, Ripple, Stellar, Monero, Dash, and
Bytecoin in the period Aug/2014-Jun/2018, the study finds that there are
structural breaks and ARCH disturbance in
each cryptocurrency, suggesting a systematic risk within the
cryptocurrency market. However, the causality between cryptocurrencies and
economic factors is undirected. Interestingly, our findings show that
cryptocurrencies are insignificant correlations with economic factors. The
result implies that cryptocurrencies can not be assumed as financial assets to
hedge systematic risks from economic factors.