Managing cryptocurrency risk exposures in equity portfolios: Evidence from high-frequency data

IF 5.4 2区经济学 Q1 BUSINESS, FINANCE

Journal of International Financial Markets Institutions & Money Pub Date : 2025-02-05 DOI:10.1016/j.intfin.2025.102123

Minhao Leong , Vitali Alexeev , Simon Kwok

引用次数: 0

Abstract

We investigate the evolving relationships between cryptocurrencies and equity portfolios and find that Bitcoin’s contributions to the active risks of equity portfolios have grown over time, exceeding 10% in defensive strategies. This underscores the increasing importance of investment professionals quantifying and managing crypto-related risk exposures in their portfolios, a task for which we provide guidance. For risk measurement, we use intraday returns to significantly improve the forecast accuracy of equity portfolio sensitivities to cryptocurrency risks. For risk management, we advocate direct hedging for optimal risk reduction and suggest using stock selection constraints as an alternative approach to limit the influence of cryptocurrencies on portfolio risk exposures.

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来源期刊

Journal of International Financial Markets Institutions & Money Multiple-

CiteScore

6.60

自引率

10.00%

发文量

142

期刊介绍： International trade, financing and investments, and the related cash and credit transactions, have grown at an extremely rapid pace in recent years. The international monetary system has continued to evolve to accommodate the need for foreign-currency denominated transactions and in the process has provided opportunities for its ongoing observation and study. The purpose of the Journal of International Financial Markets, Institutions & Money is to publish rigorous, original articles dealing with the international aspects of financial markets, institutions and money. Theoretical/conceptual and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • International financial markets • International securities markets • Foreign exchange markets • Eurocurrency markets • International syndications • Term structures of Eurocurrency rates • Determination of exchange rates • Information, speculation and parity • Forward rates and swaps • International payment mechanisms • International commercial banking; • International investment banking • Central bank intervention • International monetary systems • Balance of payments.