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Effects of the geopolitical risks on Bitcoin returns and volatility

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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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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Gozgor, Giray & Lau, Chi Keung Marco & Sheng, Xin & Yarovaya, Larisa, 2019. "The role of uncertainty measures on the returns of gold," Economics Letters, Elsevier, vol. 185(C).
    2. Ahmed, Walid M.A., 2020. "Is there a risk-return trade-off in cryptocurrency markets? The case of Bitcoin," Journal of Economics and Business, Elsevier, vol. 108(C).
    3. Al-Yahyaee, Khamis Hamed & Rehman, Mobeen Ur & Mensi, Walid & Al-Jarrah, Idries Mohammad Wanas, 2019. "Can uncertainty indices predict Bitcoin prices? A revisited analysis using partial and multivariate wavelet approaches," The North American Journal of Economics and Finance, Elsevier, vol. 49(C), pages 47-56.
    4. Lee, Chien-Chiang & Chen, Mei-Ping, 2020. "Do natural disasters and geopolitical risks matter for cross-border country exchange-traded fund returns?," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    5. Gil-Alana, Luis Alberiko & Abakah, Emmanuel Joel Aikins & Rojo, María Fátima Romero, 2020. "Cryptocurrencies and stock market indices. Are they related?," Research in International Business and Finance, Elsevier, vol. 51(C).
    6. Gozgor, Giray & Tiwari, Aviral Kumar & Demir, Ender & Akron, Sagi, 2019. "The relationship between Bitcoin returns and trade policy uncertainty," Finance Research Letters, Elsevier, vol. 29(C), pages 75-82.
    7. Elie Bouri & Rangan Gupta, 2019. "Predicting Bitcoin Returns: Comparing the Roles of Newspaper- and Internet Search-Based Measures of Uncertainty," Working Papers 201955, University of Pretoria, Department of Economics.
    8. Shanaev, Savva & Sharma, Satish & Ghimire, Binam & Shuraeva, Arina, 2020. "Taming the blockchain beast? Regulatory implications for the cryptocurrency Market," Research in International Business and Finance, Elsevier, vol. 51(C).

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