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Geopolitical risk, uncertainty and Bitcoin investment

Md Al Mamun, Gazi Uddin (), Muhammad Tahir Suleman and Sang Hoon Kang

Physica A: Statistical Mechanics and its Applications, 2020, vol. 540, issue C

Abstract: We investigate the impact of geopolitical risk, global and US economic policy uncertainty on the structure of Bitcoin correlation with various financial and commodities asset classes. We further investigate the impact of the aforementioned factors on the volatility and risk premium of Bitcoin investment. We find that both geopolitical risk and global economic policy uncertainty command a risk premium, particularly in distress market conditions. Moreover, during the period of high policy uncertainty and worsening economic conditions, Bitcoin investors can only hedge their portfolio with gold, not with other financial assets. Our results highlight that the effect of geopolitical risk, global and US economic policy uncertainty is far more significant during unfavorable economic conditions.

Keywords: Bitcoin; Economic policy uncertainty; Geopolitical risk; Risk premia (search for similar items in EconPapers)
JEL-codes: C58 F37 G14 G15 Q31 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:540:y:2020:i:c:s0378437119317522

DOI: 10.1016/j.physa.2019.123107

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Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

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