THE EFFECTS OF GOLD, STOCK MARKETS AND GEOPOLITICAL UNCERTAINTY ON BITCOIN PRICES AND VOLATILITY

Nikolaos A. Kyriazis ()
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Nikolaos A. Kyriazis: Department of Economics, University of Thessaly 28th October 78, Volos, P.C. 38333, Greece

Global Economy Journal (GEJ), 2020, vol. 20, issue 04, 1-15

Abstract: This paper investigates the nexus between Bitcoin, gold and highly innovative uncertainty indices by employing alternative Autoregressive Conditional Heteroskedasticity (ARCH) and Generalized ARCH (GARCH) specifications. The period examined covers from March 2012 up to March 2020. Econometric outcomes indicate that Bitcoin returns and volatility are positively influenced by gold returns and the S&P500 volatility index (VIX). Nevertheless, it is revealed that the innovative Geopolitical Risk Index by Caldara and Iacoviello (2019) exerts negative impacts on Bitcoin markets. Evidence indicates that the Simple Asymmetric ARCH methodology provides the best fit for the purposes of estimations. Our findings cast light on the important aspects of Bitcoin behavior and provide guidance for decision-making about portfolios that contain Bitcoin and gold. This enables economic agents to ameliorate their risk–return trade-off depending on the fluctuations in stock markets and geopolitical uncertainty.

Keywords: Bitcoin; gold; Geopolitical Risk Index; VIX; Simple Asymmetric ARCH (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S2194565920500207

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