Does global economic uncertainty matter for the volatility and hedging effectiveness of Bitcoin? |
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| Institution: | 1. School of Management and Engineering, Nanjing University, Nanjing, Jiangsu, China;2. USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon;3. Department of Economics, University of Pretoria, Pretoria 0002, South Africa;4. Montpellier Business School, Montpellier, France;1. Holy Spirit University of Kaslik (USEK), USEK Business School, Jounieh, Lebanon;2. Norwegian University of Science and Technology, Department of Industrial Economics and Technology Management, Trondheim, Norway;3. Holy Spirit University of Kaslik (USEK), USEK Business School, Jounieh, Lebanon;4. Montpellier Business School, 2300 Avenue des Moulins, 34080 Montpellier, France;5. Norwegian University of Science and Technology, Department of Industrial Economics and Technology Management, Trondheim, Norway;1. Montpellier Business School, Montpellier, France;2. USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon;3. Center for Energy and Sustainable Development, Montpellier Business School, Montpellier, France;4. Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic;5. Institute of Information Theory and Automation, Czech Academy of Sciences, Prague, Czech Republic;6. Trinity Business School, Trinity College Dublin, Dublin, Ireland;1. Istanbul Medeniyet University, Turkey;2. Department of Accountancy, Finance, and Economics, University of Huddersfield, Queensgate, Huddersfield, HD1 3DH, United Kingdom;3. Queen''s Management School, Queen''s University Belfast, BT9 5EE, Northern Ireland, United Kingdom |
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| 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 this hypothesis, except in the case of bonds. For Bitcoin investors, the results imply the ability to use information about the state of global economic uncertainty to enhance the predictions of Bitcoin volatility. We further examine whether the correlation between Bitcoin and global equities, commodities, and bonds are affected by global economic policy uncertainty. Empirical 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 the possibility of Bitcoin acting 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. Such a weak effect of the state of global economic uncertainty on the hedging ability of Bitcoin implies that investors cannot substantially enhance the hedging performance of Bitcoin under different economic uncertainty conditions. |
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