Bitcoin is an asset that demonstrated a high increase in price since it was launched in 2009, meanwhile it has been a very volatile and risky asset. Previous research has indicated that an allocation of bitcoin in investor’s portfolio could increase return as well as risk adjusted return. Furthermore, bitcoin has been observed to be uncorrelated to many markets; creating diversification opportunities and in some instances acted as a hedge against various stock markets. Due to the similarities between bitcoin and gold they have often been compared as alternative investment assets. Therefore, it is of interest for investors to understand if bitcoin could be included into a stock-portfolio in the Swedish market to increase risk adjusted returns and if bitcoin is a better alternative investment, than gold. Furthermore, if bitcoin could be used as hedge against the Swedish stock market. Three different portfolios with bitcoin were created, 1% bitcoin, 4% bitcoin and 8% bitcoin, the rest of the portfolio constitutes of Stockholm gross-index (OMXSGI). The portfolios are compared to OMXSGI and similar portfolios involving gold and OMXSGI. The portfolios are created for four different periods: 2011- 2021, 2016-2021, the bear market during the pandemic and the year 2020. Results reveals that during normal market behavior an 8% allocation of bitcoin and OMXSGI generates the highest Sharpe ratio. Also, that a small allocation of bitcoin can generate higher returns to lower risk then OMXSGI. During normal market behavior portfolio with bitcoin performs higher returns and Sharp ratio than portfolios with gold but to a higher risk. Additionally, bitcoin is not correlated to the Swedish market and implies that it possibly may be used as a hedge during normal market behavior. During the corona bear market bitcoin has a high correlation to OMXSGI and has a similar negative return but to a higher volatility. Meanwhile gold act as a safe haven during turbulent market behavior. To conclude during normal market times bitcoin creates opportunities for investors to include bitcoin to the portfolio. High allocations of 8% bitcoin might be too much risk for risk averse investors. During the corona bear market bitcoin portfolios generates worse returns to a higher risk and gold is a better asset to hold. Bitcoin and cryptocurrencies are assets which have some unique risks that cannot be measured by the Sharp ratio. Thus limit the results and analysis of the study.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:liu-181596 |
| Date | January 2021 |
| Creators | Nordenhem, Anton |
| Publisher | Linköpings universitet, Nationalekonomi, Linköpings universitet, Filosofiska fakulteten |
| Source Sets | DiVA Archive at Upsalla University |
| Language | Swedish |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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