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Categorical uncertainty in policy and bitcoin volatility

Author

Listed:
  • Wang, Qingyu
  • Huang, Qing
  • Wu, Xiangfang
  • Tan, Jin
  • Sun, Panxu

Abstract

Researchers are investigating whether Bitcoin exhibits haven properties during uncertainty. However, this notion often neglects various forms of uncertainty crucial to investors. In our study, we classify policy uncertainty into two categories: fiscal policy-related uncertainty and monetary policy-related uncertainty. We employ the GARCH-MIDAS model to examine the influence of two types of uncertainty on Bitcoin's volatility. We find that Bitcoin's volatility is significantly positively correlated with uncertainty related to fiscal policy. Conversely, a notable inverse relationship exists between Bitcoin's volatility and uncertainty tied to monetary policy. Our conclusion remains held when we execute a multi-variable GARCH-MIDAS model with variable selection.

Suggested Citation

  • Wang, Qingyu & Huang, Qing & Wu, Xiangfang & Tan, Jin & Sun, Panxu, 2023. "Categorical uncertainty in policy and bitcoin volatility," Finance Research Letters, Elsevier, vol. 58(PC).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pc:s154461232301036x
    DOI: 10.1016/j.frl.2023.104664
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    References listed on IDEAS

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