Does economic policy uncertainty predict the Bitcoin returns? An empirical investigation

Ender Demir, Giray Gozgor, Marco Chi Keung Lau, Samuel Vigne

Research output: Contribution to journalArticle

104 Citations (Scopus)
297 Downloads (Pure)

Abstract

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.

Original languageEnglish
Number of pages8
JournalFinance Research Letters
Early online date31 Jan 2018
DOIs
Publication statusEarly online date - 31 Jan 2018

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