Risk aversion and Bitcoin returns in extreme quantiles

Elie Bouri (), Rangan Gupta, Chi Keung Lau and David Roubaud ()
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David Roubaud: Montpellier Business School

Economics Bulletin, 2021, vol. 41, issue 3, 1374-1386

Abstract: We study whether level of risk aversion can be used to predict Bitcoin returns using copulas and quantile-based models. We find evidence of predictability when the market return is at extreme quantiles. Further analyses show that the cross-quantilogram is similar when risk aversion is at the low or medium level for various quantiles of Bitcoin returns. The predictability is positive when the risk aversion is at very low level. However, predictability becomes negative when both the risk aversion and Bitcoin returns are very high, suggesting that when risk aversion and Bitcoin returns are at very high levels, Bitcoin is less likely to have large gains.

Keywords: Risk-aversion; Bitcoin returns; price predictability; copulas; quantiles (search for similar items in EconPapers)
JEL-codes: C2 D8 (search for similar items in EconPapers)
Date: 2021-09-17
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