Effects of the geopolitical risks on Bitcoin returns and volatility

Ahmet Faruk Aysan; Ender Demir; Giray Gozgor; Chi Keung Lau

doi:10.1016/j.ribaf.2018.09.011

Effects of the geopolitical risks on Bitcoin returns and volatility

Ahmet Faruk Aysan, Ender Demir, Giray Gozgor, Chi Keung Lau

Research output: Contribution to journal › Article › peer-review

218 Citations (Scopus)

Abstract

This paper investigates the predictive power of global geopolitical risks (GPR) index on daily returns and price volatility of Bitcoin over the period July 18, 2010–May 31, 2018. Considering Bayesian Graphical Structural Vector Autoregressive (BSGVAR) technique, we find that GPR has a predictive power on both returns and volatility of Bitcoin. The results of the Ordinary Least Squares (OLS) estimations show that price volatility and returns of Bitcoin are positively and negatively related to the GPR, respectively. However, findings from the Quantile-on-Quantile (QQ) estimations state that the effects are positive at the higher quantiles of both the GPR as well as the price volatility and the returns of Bitcoin. Therefore, we conclude that Bitcoin can be considered as a hedging tool against global geopolitical risks.

Original language	English
Pages (from-to)	511-518
Number of pages	8
Journal	Research in International Business and Finance
Volume	47
Early online date	27 Sep 2018
DOIs	https://doi.org/10.1016/j.ribaf.2018.09.011
Publication status	Published - 1 Jan 2019

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Effects_of_the_GPR_on_the_Bitcoin_Market_last_AUGUSTAccepted author manuscript, 594 KBLicence: CC BY-NC-ND

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title = "Effects of the geopolitical risks on Bitcoin returns and volatility",

abstract = "This paper investigates the predictive power of global geopolitical risks (GPR) index on daily returns and price volatility of Bitcoin over the period July 18, 2010–May 31, 2018. Considering Bayesian Graphical Structural Vector Autoregressive (BSGVAR) technique, we find that GPR has a predictive power on both returns and volatility of Bitcoin. The results of the Ordinary Least Squares (OLS) estimations show that price volatility and returns of Bitcoin are positively and negatively related to the GPR, respectively. However, findings from the Quantile-on-Quantile (QQ) estimations state that the effects are positive at the higher quantiles of both the GPR as well as the price volatility and the returns of Bitcoin. Therefore, we conclude that Bitcoin can be considered as a hedging tool against global geopolitical risks.",

keywords = "Cryptocurrencies, Geopolitical risks, BSGVAR model, Quantile-on-quantile estimations, Bitcoin",

author = "Aysan, {Ahmet Faruk} and Ender Demir and Giray Gozgor and Lau, {Chi Keung}",

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journal = "Research in International Business and Finance",

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AU - Aysan, Ahmet Faruk

AU - Demir, Ender

AU - Gozgor, Giray

AU - Lau, Chi Keung

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N2 - This paper investigates the predictive power of global geopolitical risks (GPR) index on daily returns and price volatility of Bitcoin over the period July 18, 2010–May 31, 2018. Considering Bayesian Graphical Structural Vector Autoregressive (BSGVAR) technique, we find that GPR has a predictive power on both returns and volatility of Bitcoin. The results of the Ordinary Least Squares (OLS) estimations show that price volatility and returns of Bitcoin are positively and negatively related to the GPR, respectively. However, findings from the Quantile-on-Quantile (QQ) estimations state that the effects are positive at the higher quantiles of both the GPR as well as the price volatility and the returns of Bitcoin. Therefore, we conclude that Bitcoin can be considered as a hedging tool against global geopolitical risks.

AB - This paper investigates the predictive power of global geopolitical risks (GPR) index on daily returns and price volatility of Bitcoin over the period July 18, 2010–May 31, 2018. Considering Bayesian Graphical Structural Vector Autoregressive (BSGVAR) technique, we find that GPR has a predictive power on both returns and volatility of Bitcoin. The results of the Ordinary Least Squares (OLS) estimations show that price volatility and returns of Bitcoin are positively and negatively related to the GPR, respectively. However, findings from the Quantile-on-Quantile (QQ) estimations state that the effects are positive at the higher quantiles of both the GPR as well as the price volatility and the returns of Bitcoin. Therefore, we conclude that Bitcoin can be considered as a hedging tool against global geopolitical risks.

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KW - Geopolitical risks

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JO - Research in International Business and Finance

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Effects of the geopolitical risks on Bitcoin returns and volatility

Abstract

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