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Can Bitcoin be used as a hedge against the Swedish market?: Does Bitcoin have hedging capabilities against the OMXS30, or is it just a diversifier in a portfolio?
Stockholm University, Faculty of Social Sciences, Stockholm Business School, Finance.
Stockholm University, Faculty of Social Sciences, Stockholm Business School, Finance.
2017 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

Bitcoin has gained more recognition than ever before, and the interest in cryptocurrencies seems to grow exponentially. Without any central government regulating Bitcoin, a global user group has adopted this new technology, which is designed to be used as a currency for trading without banks. Empirical studies focus on revealing the true characteristic of cryptocurrencies. Are they a currency, an asset or something else? This paper explores the potential of Bitcoin as a financial asset when used for hedging and portfolio diversification. A regression analysis will be performed to analyse if Bitcoin can be used as a hedge against OMXS30. This analysis yields insignificant values, which leads to a complication in the conclusion. The result imply that Bitcoin is an inadequate hedge, but may possess diversification properties. Studying Bitcoin in relation to OMXS30, Dow Jones, Nikkei 225, Gold and Oil results in correlation values close to zero. By using the mean-variance optimization method, two portfolios are created, one including and one excluding Bitcoin. We show that by including Bitcoin in the portfolio the risk can be decreased on a given return rate. Considering the low and insignificant correlation values with other assets and the better riskreturn ratio when Bitcoin is included in a portfolio, we conclude that Bitcoin can be a suitable diversification tool.

Place, publisher, year, edition, pages
2017. , p. 46
Keywords [en]
Cryptocurrency, Bitcoin, Hedge, Diversifier
National Category
Business Administration
Identifiers
URN: urn:nbn:se:su:diva-153123OAI: oai:DiVA.org:su-153123DiVA, id: diva2:1183765
Available from: 2018-02-20 Created: 2018-02-19 Last updated: 2018-02-20Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf