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Does Global Economic Uncertainty Matter for the Volatility and Hedging Effectiveness of Bitcoin?

Author

Listed:
  • Libing Fang

    (School of Management and Engineering, Nanjing University, Nanjing, Jiangsu, China)

  • Elie Bouri

    (USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

  • David Roubaud

    (Montpellier Business School, Montpellier, France)

Abstract

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 that, except for the case of bonds. We further examine whether the correlation between Bitcoin and global equities, commodities, and bonds are affected by global economic policy uncertainty and the 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 a possibility for Bitcoin to act 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. Implications for investors and policy-makers are discussed.

Suggested Citation

  • Libing Fang & Elie Bouri & Rangan Gupta & David Roubaud, 2018. "Does Global Economic Uncertainty Matter for the Volatility and Hedging Effectiveness of Bitcoin?," Working Papers 201858, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201858
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    More about this item

    Keywords

    Hedging effectiveness; Bitcoin; equities; commodities; bonds;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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