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Effects of the geopolitical risks on Bitcoin returns and volatility

Author

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

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.

Suggested Citation

  • Aysan, Ahmet Faruk & Demir, Ender & Gozgor, Giray & Lau, Chi Keung Marco, 2019. "Effects of the geopolitical risks on Bitcoin returns and volatility," Research in International Business and Finance, Elsevier, vol. 47(C), pages 511-518.
    • Handle: RePEc:eee:riibaf:v:47:y:2019:i:c:p:511-518
    DOI: 10.1016/j.ribaf.2018.09.011
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