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Does global economic uncertainty matter for the volatility and hedging effectiveness of Bitcoin?

Fang, Libing ; Bouri, Elie ; Gupta, Rangan ; Roubaud, David

International review of financial analysis, 2019-01, Vol.61, p.29-36 [Periódico revisado por pares]

Elsevier Inc

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  • Título:
    Does global economic uncertainty matter for the volatility and hedging effectiveness of Bitcoin?
  • Autor: Fang, Libing ; Bouri, Elie ; Gupta, Rangan ; Roubaud, David
  • Assuntos: Bitcoin ; Bonds ; Commodities ; Equities ; Hedging effectiveness
  • É parte de: International review of financial analysis, 2019-01, Vol.61, p.29-36
  • Descrição: 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 this hypothesis, except in the case of bonds. For Bitcoin investors, the results imply the ability to use information about the state of global economic uncertainty to enhance the predictions of Bitcoin volatility. We further examine whether the correlation between Bitcoin and global equities, commodities, and bonds are affected by global economic policy uncertainty. Empirical 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 the possibility of Bitcoin acting 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. Such a weak effect of the state of global economic uncertainty on the hedging ability of Bitcoin implies that investors cannot substantially enhance the hedging performance of Bitcoin under different economic uncertainty conditions. •The state of global EPU enhances the prediction of Bitcoin volatility.•Global EPU negatively impacts Bitcoin-bonds correlation.•Global EPU positively impacts Bitcoin-equities and Bitcoin-commodities correlations.•Bitcoin is a hedge under specific economic uncertainty conditions.•Hedging effectiveness enhances slightly if the level of global EPU is considered.
  • Editor: Elsevier Inc
  • Idioma: Inglês
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  • Realização: ABCD-USP USP   Logos de Redes Sociais: Freepik

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