Does Bitcoin Hedge Global Uncertainty? Evidence from Wavelet-Based Quantile-in-Quantile Regressions
Elie Bouri (),
Rangan Gupta (),
Aviral Tiwari () and
No 201690, Working Papers from University of Pretoria, Department of Economics
In this study, we analyse whether Bitcoin can hedge uncertainty using daily data for the period of 17th March, 2011, to 7th October, 2016. Global uncertainty is measured by the first principal component of the VIXs of 14 developed and developing equity markets. We first use wavelets to decompose Bitcoin returns into various frequencies, i.e., investment horizons. Then, we apply standard OLS regressions and observe that uncertainty negatively affects raw Bitcoin return and its longer-term movements. However, given the heavy tails of the variables, we rely on quantile methods and reveal much more nuanced and interesting results. Quantile regressions indicate that Bitcoin does act as a hedge against uncertainty, that is, it reacts positively to uncertainty at both higher quantiles and shorter frequency movements of Bitcoin returns. Finally, when we use quantile-on-quantile regressions, we observe that hedging is observed at shorter investment horizons, and at both lower and upper ends of Bitcoin returns and global uncertainty.
Keywords: Bitcoin; global uncertainty; wavelet; quantile regressions (search for similar items in EconPapers)
JEL-codes: C22 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Journal Article: Does Bitcoin hedge global uncertainty? Evidence from wavelet-based quantile-in-quantile regressions (2017)
Working Paper: Does Bitcoin hedge global uncertainty? Evidence from wavelet-based quantile-in-quantile regressions (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201690
Access Statistics for this paper
More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rangan Gupta ().