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When Bitcoin meets economic policy uncertainty (EPU): Measuring risk spillover effect from EPU to Bitcoin

Gang-Jin Wang, Chi Xie, Danyan Wen and Longfeng Zhao

Finance Research Letters, 2019, vol. 31, issue C

Abstract: Bitcoin was launched to solve the distrust and uncertainty in the existing financial system. Here we investigate risk spillover effect from economic policy uncertainty (EPU) to Bitcoin using a multivariate quantile model and the Granger causality risk test. We use the US EPU index, equity market uncertainty index, and VIX as proxies for EPU. We find that risk spillover effect from EPU to Bitcoin is negligible in most conditions. Our work provides useful information on building asset portfolios for investors who have investment strategies in Bitcoin, because Bitcoin can be acted as a safe-haven or a diversifier under EPU shocks.

Keywords: Bitcoin; Economic policy uncertainty; Risk spillover effect; Multivariate quantile model; Granger causality risk test (search for similar items in EconPapers)
JEL-codes: C32 D81 G15 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:31:y:2019:i:c:s1544612318305749

DOI: 10.1016/j.frl.2018.12.028

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