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Does Global Economic Uncertainty Matter for the Volatility and Hedging Effectiveness of Bitcoin?

Libing Fang (), Elie Bouri (), Rangan Gupta () and David Roubaud
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Libing Fang: School of Management and Engineering, Nanjing University, Nanjing, Jiangsu, China

No 201858, Working Papers from University of Pretoria, Department of Economics

Abstract: We assess whether the long-run volatilities of Bitcoin, global equities, commodities, and bonds are affected by global economic policy uncertainty. Empirical results provide evidence supporting that, except for the case of bonds. We further examine whether the correlation between Bitcoin and global equities, commodities, and bonds are affected by global economic policy uncertainty and the results reveal that global economic policy uncertainty has a negative significant impact on the Bitcoin-bonds correlation, and a positive impact on both Bitcoin-equities and Bitcoin-commodities correlations, suggesting a possibility for Bitcoin to act as a hedge under specific economic uncertainty conditions. Interestingly, the hedging effectiveness of Bitcoin for both global equities and global bonds enhances slightly after considering the level of global economic policy uncertainty. Implications for investors and policy-makers are discussed.

Keywords: Hedging effectiveness; Bitcoin; equities; commodities; bonds (search for similar items in EconPapers)
JEL-codes: C10 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-rmg
Date: 2018-09
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