Predicting cryptocurrency market volatility: Novel evidence from climate policy uncertainty

Daxiang Jin and Jize Yu

Finance Research Letters, 2023, vol. 58, issue PC

Abstract: This study employs two mixed-frequency volatility models to examine the impact of climate policy uncertainty on cryptocurrency price volatility. The empirical findings reveal that climate policy uncertainty has a significant positive impact on cryptocurrency price volatility and that this effect is mainly driven by extreme climate policy shocks. That is, abrupt and substantial shifts in climate policy lead to increased volatility in cryptocurrency prices. Moreover, different cryptocurrencies exhibit different responses to climate policy uncertainty. In addition, the predictive performance of the model that accounts for extreme shocks to climate policy uncertainty outperforms the basic GARCH-MIDAS-CPU model for all three cryptocurrencies.

Keywords: Climate policy uncertainty; Cryptocurrency market; GARCH-MIDAS (search for similar items in EconPapers)
JEL-codes: C22 C53 Q54 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pc:s1544612323008929

DOI: 10.1016/j.frl.2023.104520

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