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HEC-Ecole de gestion de l'Université de Liège
HEC-Ecole de gestion de l'Université de Liège
MASTER THESIS
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Appréciation du marché de la crypto-monnaie comme opportunité d'investissement pour la diversification d'un portefeuille

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Kidane, Gil ULiège
Promotor(s) : Sougné, Danielle ULiège
Date of defense : 3-Sep-2019/10-Sep-2019 • Permalink : http://hdl.handle.net/2268.2/7802
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Title : Appréciation du marché de la crypto-monnaie comme opportunité d'investissement pour la diversification d'un portefeuille
Translated title : [en] Appreciation of the cryptocurrency market as an investment opportunity for portfolio diversification
Author : Kidane, Gil ULiège
Date of defense  : 3-Sep-2019/10-Sep-2019
Advisor(s) : Sougné, Danielle ULiège
Committee's member(s) : Ledent, Maxime ULiège
Moreno Miranda, Nicolas ULiège
Language : French
Number of pages : 111
Keywords : [fr] crypto-monnaie
[fr] diversification de portefeuille
[fr] bitcoin
[en] cryptocurrency
[en] portfolio diversification
[en] bitcoin
Discipline(s) : Business & economic sciences > Finance
Institution(s) : Université de Liège, Liège, Belgique
Degree: Master en sciences de gestion, à finalité spécialisée en Banking and Asset Management
Faculty: Master thesis of the HEC-Ecole de gestion de l'Université de Liège

Abstract

[en] Mr. Satoshi Nakamoto has launched the Bitcoin in 2008. Thereafter, it is nearly 2200 other cryptocurrencies that have been created. Furthermore, over the last few years, financial markets are experiencing bad performances and correlation coefficients between traditional assets are constantly increasing. This thesis examines, considering those changes, the cryptocurrency market in terms of investment opportunity and portfolio diversification. Moreover, this report will answer to two main questions Does the cryptocurrency market represent a new investment opportunity? and If so, what is its potential in terms of portfolio diversification ?
To be able to answer the above questions, an empirical study has been conducted based on two proposals: first, portfolio allocation and second, portfolio optimization. The Modern Portfolio Theory developed by H. Markowitz (1952) and performance indicators such as the Sharpe and Sortino ratios have been used to carry out this research.
Primarily, three cryptocurrencies (bitcoin, ether and ripple) were added one by one to portfolios whose asset mix had been previously defined according to three types of investment strategies: defensive, moderate and aggressive. It emerged that the best possible choice to maximize the Sharpe ratio and to minimize the standard deviation is by adding a 10% proportion of bitcoin in a defensive strategy portfolio mainly due to the weak correlation the cryptocurrency shares with bonds. Anyone who wants to maximize the Sortino ratio would rather choose the ripple due to its low downside deviation. Secondly, the impact of adding cryptocurrencies to portfolios previously diversified with other traditional assets such as stocks and bonds has been evaluated. According to the results, the inclusion of bitcoin (1.75%), ether (0.45%) and ripple (0,02%) increases the Sharpe ratio. Indeed, the efficient frontier moves upward when the investment in the cryptocurrency market is not constrained, which allows the investor to achieve a higher return for the same level of risk. Moreover, the three cryptocurrencies seem to be a very good option when it comes to the Sortino ratio improvement. Indeed, the results show that a proportion of 10% in cryptocurrencies maximizes the ratio.
One can conclude that the cryptocurrency market represents an investment opportunity for portfolio diversification and deserves to be taken seriously into account by investors.


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Author

  • Kidane, Gil ULiège Université de Liège > Master sc. gest., à fin.

Promotor(s)

Committee's member(s)

  • Ledent, Maxime ULiège Université de Liège - ULiège > HEC Liège : UER > Analyse financière et finance d'entreprise
    ORBi View his publications on ORBi
  • Moreno Miranda, Nicolas ULiège Université de Liège - ULiège > HEC Liège : UER > Analyse financière et finance d'entreprise
    ORBi View his publications on ORBi
  • Total number of views 334
  • Total number of downloads 16










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