Work

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

Year: 2025

Type: article

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.

Source: Journal of International Financial Markets Institutions and Money

DOI: 10.1016/j.intfin.2025.102123

Authors: Minhao Leong, Vitali Alexeev, Simon Kwok

Institutions: The University of Sydney, University of Technology Sydney

Language: English

Topic: Financial Risk and Volatility Modeling

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $2,930

OpenAlex ID: W4407150289

FWCI: 6.573

Cites: 50

Cited by: 8

Related to: 10