Abstract
Cryptocurrencies are a new emergence at the intersection of technology and finance. It is therefore of particular interest whether cryptocurrencies can form a new asset class or need to be subsumed under an existing one. We find that cryptocurrencies show characteristics of a distinct asset class based on strong internal correlation, an absence of correlation with any traditional asset class as well as sufficient market liquidity, while market stability has room for improvement. Adding cryptocurrency to traditional portfolio structures may lead to significant and persistent risk-adjusted outperformance. These results support the careful introduction of cryptocurrencies into the asset management mainstream.
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