Comparative Analysis Of Cryptocurrency And Lq45 Stock Portfolio Performance Using Sharpe, Treynor, And Jensen Methods
Keywords:
portfolio performance; cryptocurrency; LQ45; Sharpe ratio; Treynor ratio; Jensen’s alphaAbstract
This study compares the risk-adjusted performance of a cryptocurrency portfolio and an LQ45 stock portfolio on the Indonesia Stock Exchange using the Sharpe, Treynor, and Jensen methods. The sample consists of five major cryptocurrencies (Bitcoin, Ethereum, BNB, Solana, and XRP) and ten LQ45 stocks, observed monthly from January 2021 to June 2026 (66 months), with the Jakarta Composite Index (JCI) as the market benchmark and the Bank Indonesia (BI) Rate as the risk-free rate. Equal-weighted portfolios are formed for each asset class, and differences in performance are tested using the Jobson–Korkie test with Memmel’s correction. The results show that the cryptocurrency portfolio delivers a much higher annualized return (44.1% versus 0.8%) and higher Sharpe, Treynor, and Jensen values than the LQ45 portfolio, but at the cost of extreme volatility and a maximum drawdown of 91%. The difference in Sharpe ratios is not statistically significant over the full sample, though it is significant in 2021–2023. Rankings across the three measures are broadly consistent. Adding a small allocation of cryptocurrency (5–10%) to an LQ45 portfolio improves its Sharpe ratio. The findings suggest that cryptocurrency is better viewed as a small satellite allocation than as a substitute for blue-chip stocks.
References
Baur, D. G., Hong, K., & Lee, A. D. (2018). Bitcoin: Medium of exchange or speculative assets? Journal of International Financial Markets, Institutions and Money, 54, 177–189.
Bouri, E., Molnár, P., Azzi, G., Roubaud, D., & Hagfors, L. I. (2017). On the hedge and safe haven properties of Bitcoin: Is it really more than a diversifier? Finance Research Letters, 20, 192–198.
Brière, M., Oosterlinck, K., & Szafarz, A. (2015). Virtual currency, tangible return: Portfolio diversification with bitcoin. Journal of Asset Management, 16(6), 365–373.
Conlon, T., & McGee, R. (2020). Safe haven or risky hazard? Bitcoin during the COVID-19 bear market. Finance Research Letters, 35, 101607.
Corbet, S., Lucey, B., Urquhart, A., & Yarovaya, L. (2019). Cryptocurrencies as a financial asset: A systematic analysis. International Review of Financial Analysis, 62, 182–199.
Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The Journal of Finance, 25(2), 383–417.
Hartono, J. (2017). Teori portofolio dan analisis investasi [Portfolio theory and investment analysis] (11th ed.). BPFE.
Iyer, T. (2022). Cryptic connections: Spillovers between crypto and equity markets (Global Financial Stability Notes No. 2022/01). International Monetary Fund.
Jensen, M. C. (1968). The performance of mutual funds in the period 1945–1964. The Journal of Finance, 23(2), 389–416.
Jobson, J. D., & Korkie, B. M. (1981). Performance hypothesis testing with the Sharpe and Treynor measures. The Journal of Finance, 36(4), 889–908.
Kajtazi, A., & Moro, A. (2019). The role of bitcoin in well diversified portfolios: A comparative global study. International Review of Financial Analysis, 61, 143–157.
Katsiampa, P. (2017). Volatility estimation for Bitcoin: A comparison of GARCH models. Economics Letters, 158, 3–6.
Ledoit, O., & Wolf, M. (2008). Robust performance hypothesis testing with the Sharpe ratio. Journal of Empirical Finance, 15(5), 850–859.
Lintner, J. (1965). The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets. The Review of Economics and Statistics, 47(1), 13–37.
Liu, Y., & Tsyvinski, A. (2021). Risks and returns of cryptocurrency. The Review of Financial Studies, 34(6), 2689–2727.
Markowitz, H. (1952). Portfolio selection. The Journal of Finance, 7(1), 77–91.
Memmel, C. (2003). Performance hypothesis testing with the Sharpe ratio. Finance Letters, 1, 21–23.
Modigliani, F., & Modigliani, L. (1997). Risk-adjusted performance. The Journal of Portfolio Management, 23(2), 45–54.
Nakamoto, S. (2008). Bitcoin: A peer-to-peer electronic cash system. https://bitcoin.org/bitcoin.pdf
Platanakis, E., & Urquhart, A. (2020). Should investors include Bitcoin in their portfolios? A portfolio theory approach. The British Accounting Review, 52(4), 100837.
Roll, R. (1977). A critique of the asset pricing theory’s tests. Part I: On past and potential testability of the theory. Journal of Financial Economics, 4(2), 129–176.
Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. The Journal of Finance, 19(3), 425–442.
Sharpe, W. F. (1966). Mutual fund performance. The Journal of Business, 39(1), 119–138.
Sharpe, W. F. (1994). The Sharpe ratio. The Journal of Portfolio Management, 21(1), 49–58.
Tandelilin, E. (2010). Portofolio dan investasi: Teori dan aplikasi [Portfolio and investment: Theory and application]. Kanisius.
Treynor, J. L. (1965). How to rate management of investment funds. Harvard Business Review, 43(1), 63–75.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 R Lutfi Zakaria, Suharyanto, Gema Merdeka Goeyardi, Made Kamisutara, Rony Wardhana
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
