Honors Theses and Capstones

Date of Award

Spring 2022

Project Type

Senior Honors Thesis

College or School

PAUL

Department

Finance

Program or Major

Finance

Degree Name

Bachelor of Science

First Advisor

Michael Hanlon

Abstract

This study examines the backgrounds of Bitcoin and Ethereum. How they came about, where they differ from one another in functions, and what investors believe will be a better cryptocurrency stock as an investment to include in an optimized portfolio. It will also study the impact of adding two leading cryptocurrencies, Bitcoin and Ethereum, into a hypothetical, optimal investment portfolio. Data collection includes the adjusted closing price of 30 diversified stocks from 2016 to 2021. Those adjusted closing prices are the beginning of determining the optimal portfolio for three separate portfolios. One has the Ethereum cryptocurrencies, the other has Bitcoin cryptocurrency, and the final portfolio has no cryptocurrency. Those portfolios will ultimately determine the highest expected return with the lowest potential risk. This will allow for understanding of what the best cryptocurrency would be to add to an investment portfolio and the hypothetical stocks to include in an optimized portfolio. One notion to be aware of is that this is a hypothetical portfolio, meaning that there will be variation in the return or risk as the stock prices and volatility of the market are constantly changing. There are no studies currently looking at the impact of cryptocurrency in an optimal portfolio, hence there were no research studies done to compare the results.

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