FINANCE


Optimal Strategies for Digital Assets with No Fundamental Journal of Portfolio Management, 52, 1, November 2025


LINK TO PAPER ROBERT A. JARROW


RONALD P. AND SUSAN E. LYNCH PROFESSOR OF INVESTMENT MANAGEMENT


Samuel Curtis Johnson Graduate School of Management


Cornell SC Johnson College of Business Cornell University


Author • Robert A. Jarrow Ronald P. and Susan E. Lynch Professor of Investment


Management, Samuel Curtis Johnson Graduate School of Management, Cornell SC Johnson College of Business, Cornell University


Summary Digital assets such as Bitcoin, Ethereum, and meme tokens generate no cash


flows and have no underlying collateral pool, meaning their market prices are bubble-driven under standard asset-pricing theory. Yet investors may still wish to trade these assets for speculative opportunities or potential diversifi- cation benefits.


Tis article examines how to engage in these markets while maintaining normal, risk-adjusted expected returns despite the eventual collapse of such bubbles. Traditional strategies such as buy-and-hold or outright shorting are shown to be suboptimal. Instead, the author proposes a disciplined mar- ket-timing strategy in which the investor holds the asset during its rise and exits at a predetermined price barrier to lock in gains. Tis framework pro- vides a practical method for incorporating nonfundamental digital assets into modern portfolio management.


CONTENTS TO MAIN


| RESEARCH WITH IMPACT: CORNELL SC JOHNSON COLLEGE OF BUSINESS • 2025 EDITION


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