What is it about?
The study finds that well-constructed DA-MAC portfolios can offer significant diversification benefits and improved total returns compared to conventional equity-bond-commodity-real estate portfolios. However, due to the high volatility of digital assets, we recommend including them in small proportions. The research applies established portfolio construction methodologies to incorporate cryptocurrencies, addressing market efficiency and price discovery issues. It utilizes Modern Portfolio Theory (MPT) metrics and tests to analyze the impact of DAs on portfolio performance. Empirical data supports the diversification benefits of DA-MAC portfolios, showing reduced cross-asset correlations and an upward shift in the efficient frontier.
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Why is it important?
While DA-MAC portfolios present interesting opportunities, the role of cryptocurrencies in investment strategies remains a topic of ongoing discussion due to their volatility and regulatory concerns. The recent approval of DA ETFs by the US government marks a significant milestone in their integration into mainstream finance and the asset allocation process. As on November 18, 2024 a Bitcoin is priced at about $90,000 (USD).
Perspectives
As of May 2025 Bitcoin is about 107,000. Due to the volatility of Digital Currencies a smaller allocation possibly creates a more sustainable DA-MAC framework.
Professor Pankaj Agrrawal
University of Maine
Read the Original
This page is a summary of: CRYPTOCURRENCIES AS A PART OF A MULTI-ASSET PORTFOLIO (Equities, Bonds, Real-Estate, Currencies, Commodities, Gold plus Digital Assets) , SSRN Electronic Journal, January 2025, Elsevier,
DOI: 10.2139/ssrn.5025707.
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