Business conditions, uncertainty shocks and Bitcoin returns
- PDF / 1,002,946 Bytes
- 10 Pages / 439.37 x 666.142 pts Page_size
- 12 Downloads / 206 Views
Business conditions, uncertainty shocks and Bitcoin returns Yong Jiang1 · Gang‑Jin Wang2 · Dan‑Yan Wen3 · Xiao‑guang Yang4
© Japan Association for Evolutionary Economics 2020
Abstract Using a causality test in the frequency domain and a quantile regression model, we examine the impact of the US business conditions and uncertainty shocks (the US equity market uncertainty and global geopolitical risk) on Bitcoin returns. We find that (1) there exists significant causality from the US business condition and uncer‑ tainty shocks to Bitcoin returns, and (2) the effects of the US business condition and uncertainty shocks on Bitcoin returns depend on frequency and vary across different market states of Bitcoin. Keywords Bitcoin · US business condition · Global geopolitical risk · US equity market uncertainty · Causality test · Quantile regression JEL Classification G15 · C32 · D81
* Gang‑Jin Wang [email protected] * Dan‑Yan Wen [email protected] Yong Jiang [email protected] Xiao‑guang Yang [email protected] 1
School of Finance, Nanjing Audit University, Nanjing 211815, China
2
Business School and Center for Finance and Investment Management, Hunan University, Changsha 410082, China
3
School of Economics and Management, Nanjing University of Science and Technology, Nanjing 210094, China
4
Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing 100190, China
13
Vol.:(0123456789)
Evolutionary and Institutional Economics Review
1 Introduction Bitcoin is the first and most popular decentralized cryptocurrency. Recently, Bit‑ coin has received substantial attention from investors, speculators, and policy‑ makers (Yi et al. 2018; Almudhaf 2018; Corbet et al. 2019; Wang et al. 2019). At the end of 2017, Bitcoin price peaked at more than $19 500 and market capitali‑ zation exceeded $320 billion. However, after just 10 months, its price fell below $6500 in October 2018 and its market capitalization reduced to $112 billion as of October 23, 2018. Bitcoin’s huge price swings has left some investors nursing losses and thus the future trend of Bitcoin price has become a hot spot for inves‑ tors. Therefore, a question naturally is raised here: what drives Bitcoin’s price? A rapidly growing literature pays attention to the determinants of Bitcoin prices. Bouoiyour and Selmi (2015) argue that speculation affects Bitcoin price. Some scholars find that uncertainty factors such as global geopolitical risk (Aysan et al. 2019), the US economic policy uncertainty (Demir et al. 2018; Wang et al. 2019) and the US equity uncertainty (Bouri et al. 2017) have predictive power on Bitcoin prices. While Dastgir et al. (2019) report that the attention from social media to Bitcoin is closely related to Bitcoin price. Besides, some researchers (see, e.g., Corbet et al. 2018; Bouri et al. 2018; Baur et al. 2018) find that price information from traditional financial assets such as commodities (gold and oil), bonds, exchange rates and stocks can improve the predictability of Bitcoin price. In sum
Data Loading...
