Trade uncertainties and the hedging abilities of Bitcoin |
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| Authors: | Elie Bouri Konstantinos Gkillas Rangan Gupta |
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| Institution: | 1. Department of Finance, USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon;2. Department of Business Administration, University of Patras, Patras, Greece;3. Department of Economics, University of Pretoria, Pretoria, South Africa |
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| Abstract: | In this paper, we first estimate the monthly realised correlation, based on daily data, between stock returns of the United States (US) and Bitcoin returns. Then, we relate the realised correlation over the period October 2011 to May 2019 with a news-based measure of the growth of trade uncertainty of the US. Our results show that the realised correlation is negatively impacted by increases in trade uncertainty, which continues to hold under alternative robustness checks, suggesting that Bitcoin can act as a hedge relative to the conventional stock market in the wake of heightened trade policy-related uncertainties, and provide diversification benefits for investors. |
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| Keywords: | Bitcoin realised correlation trade uncertainty US stock market |
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