TY - JOUR
T1 - Does economic policy uncertainty predict the Bitcoin returns? An empirical investigation
AU - Demir, Ender
AU - Gozgor, Giray
AU - Lau, Marco Chi Keung
AU - Vigne, Samuel
PY - 2018/1/31
Y1 - 2018/1/31
N2 - We examine whether Bitcoin can hedge global uncertainty, measured by the first principal component of the VIXs of 14 developed and developing equity markets. After decomposing Bitcoin returns into various frequencies, i.e., investment horizons, and given evidence of heavy-tails, we employ quantile regression. We reveal that Bitcoin does act as a hedge against uncertainty: it reacts positively to uncertainty at both higher quantiles and shorter frequency movements of Bitcoin returns. Further, we use quantile-on-quantile regression and identify that hedging is observed at shorter investment horizons, and at both lower and upper ends of Bitcoin returns and global uncertainty.
AB - We examine whether Bitcoin can hedge global uncertainty, measured by the first principal component of the VIXs of 14 developed and developing equity markets. After decomposing Bitcoin returns into various frequencies, i.e., investment horizons, and given evidence of heavy-tails, we employ quantile regression. We reveal that Bitcoin does act as a hedge against uncertainty: it reacts positively to uncertainty at both higher quantiles and shorter frequency movements of Bitcoin returns. Further, we use quantile-on-quantile regression and identify that hedging is observed at shorter investment horizons, and at both lower and upper ends of Bitcoin returns and global uncertainty.
U2 - 10.1016/j.frl.2018.01.005
DO - 10.1016/j.frl.2018.01.005
M3 - Article
JO - Finance Research Letters
JF - Finance Research Letters
SN - 1544-6123
ER -