Article
The value of bitcoins in enhancing the efficiency of an investor’s portfolio
Journal of Financial Planning
(2014)
Abstract
Bitcoin is a digital currency devised by a programmer or a group of programmers under the pseudonym of Satoshi Nakamoto. Nakamoto guided bitcoin's development until 2010. Unlike most virtual currencies, bitcoin can be exchanged for real-life goods and services on a limited basis. This paper attempts to answer the questions how useful bitcoin is as a currency, and what role bitcoin might play in enhancing the efficiency of an investor's portfolio. In an attempt to examine if bitcoin behaves like a currency, the authors examined the distributional properties of its returns along with those of other major currencies and gold. The analysis reveals that, as a currency, bitcoins are in their infancy. Currently, limited acceptability makes bitcoins a poor medium of exchange, while high volatility makes this asset a poor store of value. Given the observations, and the conclusions from the empirical analysis, individual investors can benefit from holding a small amount of bitcoins in a diversified portfolio.
Keywords
- Risk exposure,
- Portfolio investments,
- Digital currencies,
- Studies
Disciplines
Publication Date
2014
Citation Information
C. Y. Wu and Vivek Pandey. "The value of bitcoins in enhancing the efficiency of an investor’s portfolio" Journal of Financial Planning Vol. 27 Iss. 9 (2014) p. 44 - 52 Available at: http://works.bepress.com/vivek-pandey/6/