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

Ender Demir, Giray Gözgör, Chi Keung Lau and Samuel A. Vigne

Finance Research Letters, 2018, vol. 26, issue C, 145-149

Abstract: This paper analyzes the prediction power of the economic policy uncertainty (EPU) index on the daily Bitcoin returns. Using the Bayesian Graphical Structural Vector Autoregressive model as well as the Ordinary Least Squares and the Quantile-on-Quantile Regression estimations, the paper finds that the EPU has a predictive power on Bitcoin returns. Fundamentally, Bitcoin returns are negatively associated with the EPU. However, the effect is positive and significant at both lower and higher quantiles of Bitcoin returns and the EPU. In the light of these findings, the paper concludes that Bitcoin can serve as a hedging tool against uncertainty.

Keywords: Bitcoin; Cryptocurrencies; Economic policy uncertainty; Bayesian graphical model; Structural vector autoregressive; Quantile-on-quantile regression (search for similar items in EconPapers)
JEL-codes: C22 D81 G15 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (341)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:26:y:2018:i:c:p:145-149

DOI: 10.1016/j.frl.2018.01.005

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