Cryptocurrencies in institutional investors' portfolios: Evidence from industry stop-loss rules

摘要

Cryptocurrencies are characterized by very high volatility, which makes them unlikely candidates for institutional investors' portfolios. Our paper examines whether the application of industry stop-loss rules makes investment in cryptocurrencies more feasible for institutional investors. We show that volatility and returns on investment in a single cryptocurrency or a portfolio of cryptoassets are nearly halved when stop-loss rules are in place. Moreover, our analysis shows that the survival rate of long positions in cryptocurrencies does not exceed 35%. We conclude that the application of stop-loss rules may help in managing the risk of investment in cryptoassets. Our results also highlight the importance of the development of cryptoasset-specific stop-loss rules to deal with the low survival rate. (C) 2019 Elsevier B.V. All rights reserved.