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When Bitcoin meets economic policy uncertainty (EPU): Measuring risk spillover effect from EPU to Bitcoin

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  • Wang, Gang-Jin
  • Xie, Chi
  • Wen, Danyan
  • Zhao, Longfeng

Abstract

Bitcoin was launched to solve the distrust and uncertainty in the existing financial system. Here we investigate risk spillover effect from economic policy uncertainty (EPU) to Bitcoin using a multivariate quantile model and the Granger causality risk test. We use the US EPU index, equity market uncertainty index, and VIX as proxies for EPU. We find that risk spillover effect from EPU to Bitcoin is negligible in most conditions. Our work provides useful information on building asset portfolios for investors who have investment strategies in Bitcoin, because Bitcoin can be acted as a safe-haven or a diversifier under EPU shocks.

Suggested Citation

  • Wang, Gang-Jin & Xie, Chi & Wen, Danyan & Zhao, Longfeng, 2019. "When Bitcoin meets economic policy uncertainty (EPU): Measuring risk spillover effect from EPU to Bitcoin," Finance Research Letters, Elsevier, vol. 31(C).
    • Handle: RePEc:eee:finlet:v:31:y:2019:i:c:s1544612318305749
    DOI: 10.1016/j.frl.2018.12.028
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    References listed on IDEAS

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    More about this item

    Keywords

    Bitcoin; Economic policy uncertainty; Risk spillover effect; Multivariate quantile model; Granger causality risk test;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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