Graduation Year

Spring 2014

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Fan Yu

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Terms of Use for work posted in Scholarship@Claremont.

Rights Information

© Matthew J. Allan 2014

Abstract

This paper will show the effect of cryptocurrencies, specifically Bitcoin and Litecoin, on a diversified portfolio of traditional and alternative assets. By using weekly closing price of these data, I use a single-index model to find betas, Sharpe ratios, and asset correlations. Then using the Markowitz Portfolio Optimization model to find optimal weights both with and without percentage restrictions. To date there is little academic research into cryptocurrency portfolio management. This paper expands upon a similar study done in the summer of 20131 through the Université Libre de Bruxelles. However, their data was from before a major spike in Bitcoin demand in November that same year, and did not include Litecoin. This paper fills the gap.

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