Bitcoin and Global Financial Stress: A Copula-Based Approach to Dependence and Causality-in-Quantiles
Elie Bouri (),
Rangan Gupta (),
Chi Lau (),
David Roubaud and
Shixuan Wang ()
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Chi Lau: Newcastle Business School, Northumbria University, Newcastle, UK
Shixuan Wang: Cardiff Business School, Cardiff University, CF10 3EU, United Kingdom
No 201750, Working Papers from University of Pretoria, Department of Economics
We apply different techniques and uncover the quantile conditional dependence between the global financial stress index and Bitcoin returns from March 18, 2011, to October 7, 2016. The results from the copula-based dependence show evidence of right-tail dependence between the global financial stress index and Bitcoin returns. We focus on the conditional quantile dependence and indicate that the global financial stress index strongly Granger-causes Bitcoin returns at the left and middle tail of the distribution of the Bitcoin returns, conditional on the global financial stress index. Finally, we use a bivariate cross-quantilogram approach and show only limited directional predictability from the global financial stress index to Bitcoin returns in the medium term, for which Bitcoin can act as a safe haven against global financial stress.
Keywords: Bitcoin; global financial stress index; dependence; copula; quantiles (search for similar items in EconPapers)
JEL-codes: C22 G15 (search for similar items in EconPapers)
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