Date of Award


Degree Name

Doctor of Philosophy



First Advisor

Gilbert, Scott


The first chapter examines whether Bitcoin, the most popular cryptocurrency, is a good investment vehicle for diversifying an investment portfolio by testing its systematic risk. The chapter also estimates the optimal proportion of Bitcoin that should be included in an investment portfolio. The observation period in this chapter is between 7/20/2010 and 6/30/2014, and a wide range of regions are examined around the world. The Capital Asset Pricing Model and the Fama-French Three Factor Model are used to examine the systematic risk of Bitcoin, and the optimal proportion of Bitcoin in an investment portfolio is estimated by the mean-variance portfolio analyses. The results show that Bitcoin is a non-systematic risk asset around the world markets so that Bitcoin can be used to diversify the risk in an investment portfolio. Besides, The mean-variance portfolio analyses suggest that the optimal proportion of Bitcoin in an investment portfolio is between 4.4\% and 21.5\%. In the second chapter, the Autoregressive Distributed Lag cointegration with bounds test approach and the unrestricted vector autoregressive model with Granger causality tests are applied to identify the determinants of Bitcoin price movement. The time series daily data from 8/17/2010 to 1/8/2016 is used in this chapter. The control variables include the supply and demand fundamentals of Bitcoin, macro economic indicators, and investor's attractiveness of Bitcoin. The results confirm the existence of Bitcoin price equilibrium in the long run. In the short run, the price of Bitcoin is affected by its supply and demand fundamentals such as Bitcoin US exchange trade volume and the number of transaction in Bitcoin. In addition, the findings suggest that the causality between Bitcoin price and its supply and demand fundamentals are bi-directional. The third chapter studies the liquidity of Bitcoin using the time series daily data over the period 1/1/2014 to 12/31/2015. Based on the available data for Bitcoin, five liquidity measures are chosen to evaluate the liquidities of five Bitcoin exchange companies and different size of stocks. The results suggest that the liquidity of Bitcoin is sensitive to the choice of the Bitcoin exchange company. The Bitcoin exchange company called Bitfinex provides the highest liquidity for Bitcoin trading. Moreover, the results indicate that stocks are more liquid than Bitcoin no matter the market capitalization sizes of stocks.




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