Does economic policy uncertainty predict the Bitcoin returns? An empirical investigation.

Ender Demir, Giray Gozgor, Chi Keung Marco Lau, Samuel A. Vigne

Research output: Contribution to journalArticle

46 Citations (Scopus)

Abstract

This paper analyzes the prediction power of the economic policy uncertainty (EPU) index on the daily Bitcoin returns. Using the Bayesian Graphical Structural Vector Autoregressive model as well as the Ordinary Least Squares and the Quantile-on-Quantile Regression estimations, the paper finds that the EPU has a predictive power on Bitcoin returns. Fundamentally, Bitcoin returns are negatively associated with the EPU. However, the effect is positive and significant at both lower and higher quantiles of Bitcoin returns and the EPU. In the light of these findings, the paper concludes that Bitcoin can serve as a hedging tool against uncertainty.
LanguageEnglish
Pages145-149
Number of pages5
JournalFinance Research Letters
Volume26
Early online date31 Jan 2018
DOIs
Publication statusPublished - Sep 2018

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Empirical investigation
Policy uncertainty
Economic policy
Quantile
Prediction
Vector autoregressive model
Uncertainty
Ordinary least squares
Hedging
Predictive power
Quantile regression

Cite this

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title = "Does economic policy uncertainty predict the Bitcoin returns? An empirical investigation.",
abstract = "This paper analyzes the prediction power of the economic policy uncertainty (EPU) index on the daily Bitcoin returns. Using the Bayesian Graphical Structural Vector Autoregressive model as well as the Ordinary Least Squares and the Quantile-on-Quantile Regression estimations, the paper finds that the EPU has a predictive power on Bitcoin returns. Fundamentally, Bitcoin returns are negatively associated with the EPU. However, the effect is positive and significant at both lower and higher quantiles of Bitcoin returns and the EPU. In the light of these findings, the paper concludes that Bitcoin can serve as a hedging tool against uncertainty.",
keywords = "Bitcoin, Cryptocurrencies, Economic policy uncertainty, Bayesian graphical model, Quantile-on-quantile regression, Structural vector autoregressive",
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Does economic policy uncertainty predict the Bitcoin returns? An empirical investigation. / Demir, Ender; Gozgor, Giray; Lau, Chi Keung Marco; Vigne, Samuel A.

In: Finance Research Letters, Vol. 26, 09.2018, p. 145-149.

Research output: Contribution to journalArticle

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