University of Twente Student Theses
Discovering the Relationship Between the Returns of Cryptocurrencies and the Returns of Traditional Industries
Slenter, Y.T.I.M. (2023) Discovering the Relationship Between the Returns of Cryptocurrencies and the Returns of Traditional Industries.
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| Abstract: | This research paper aims to provide a comprehensive analysis of the relationship between the returns of cryptocurrencies and the returns of various traditional industries. This is done by analysing the differences in correlation, returns, and risk-adjusted returns between the cryptocurrency index CRIX and indices of the information technology, health care, real estate, energy and financials industries. It also creates various portfolios to assess the viability of including cryptocurrencies in a diversified portfolio. The study concludes that there is still no correlation between the returns of cryptocurrencies and the returns of the 5 traditional industries. Furthermore, while cryptocurrencies have yielded significantly higher returns than the 5 traditional industries, these returns also came with high volatility. When looking at the risk-adjusted returns of the analysed indices over the analysed period, cryptocurrencies had a lower Sharpe ratio than the indices of both the Information Technology and the Health Care industries despite the average monthly returns of cryptocurrencies being a multiple of the average monthly returns of these two indices. The use of a cryptocurrency index for comparison to traditional assets yielded similar results to using a single cryptocurrency for comparison, indicating strong correlation among cryptocurrencies. Lastly, it concludes that including cryptocurrencies in a diversified portfolio offers slight diversification benefits. |
| Item Type: | Essay (Bachelor) |
| Faculty: | BMS: Behavioural, Management and Social Sciences |
| Subject: | 83 economics |
| Programme: | International Business Administration BSc (50952) |
| Link to this item: | https://purl.utwente.nl/essays/94587 |
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