Marketing

Actuarial science

Transaction cost

Microeconomics

Post-modern portfolio theory

Project portfolio management

Computer security

Portfolio

Cryptocurrency

Economics

Computer science

Business

Diversification (marketing strategy)

Replicating portfolio

Estimation

Management

Econometrics

Project management

Risk management

Financial economics

Portfolio optimization

Finance

Black–Litterman model

Economics Letters

This paper contributes to the literature on cryptocurrencies, portfolio management and estimation risk by comparing the performance of naïve diversification, Markowitz diversification and the advanced Black–Litterman model with VBCs that controls for estimation errors in a portfolio of cryptocurrencies. We show that the advanced Black–Litterman model with VBCs yields superior out-of-sample risk-adjusted returns as well as lower risks. Our results are robust to the inclusion of transaction costs and short-selling, indicating that sophisticated portfolio techniques that control for estimation errors are preferred when managing cryptocurrency portfolios.

Portfolio management with cryptocurrencies: The role of estimation risk