Does Bitcoin add Any Value to the Investment Portfolios?

In this study, we investigate how adding cryptocurrencies can influence investment portfolios. For this purpose, we consider a portfolio including Bitcoin and the five major sector indices of the Tehran Stock Exchange. At first, the asset returns are predicted through an estimation model based on higher moments. In the second step, the properties of Bitcoin in the face of other assets in a portfolio were studied by the asymmetric dynamic conditional correlation model (ADCC). Then, the optimal weights in the portfolios were estimated. Accordingly, four different portfolio optimization models, including high moments, the risk from the ADCC model, and maximizing Sharpe and Sortino ratios, were used. The out-of-sample results obtained from estimating the returns based on higher moments show the relative effectiveness in predicting the return on assets. In addition, the results of the ADCC model showed that bitcoin plays a risk hedging role for the Pharmaceutical and banking sectors. The results also show that Bitcoin is a safe-haven asset for the banking, petrochemical, metals, automobile, and pharmaceutical sectors at different confidence levels. The results of portfolio selection also prove the effectiveness of adding bitcoin with a maximum weight of 10% in the portfolio