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Does gold or Bitcoin hedge economic policy uncertainty?

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  • Wu, Shan
  • Tong, Mu
  • Yang, Zhongyi
  • Derbali, Abdelkader

Abstract

Calculating the hedge and safe-haven properties of gold and Bitcoin via GARCH model and quantile regression with dummy variables. We find that: (1) Neither gold nor Bitcoin can serve as a strong hedge or safe-haven for economic policy uncertainty (EPU) at the average condition. (2) Bitcoin is more responsive to EPU shocks, while gold maintains stability with smaller hedge and safe-haven coefficients. (3) In most cases, both gold and Bitcoin can act as the weak hedge and weak safe-haven against EPU during the extreme bearish and bullish markets, which two can be considered for portfolio diversification during the normal market.

Suggested Citation

  • Wu, Shan & Tong, Mu & Yang, Zhongyi & Derbali, Abdelkader, 2019. "Does gold or Bitcoin hedge economic policy uncertainty?," Finance Research Letters, Elsevier, vol. 31(C), pages 171-178.
    • Handle: RePEc:eee:finlet:v:31:y:2019:i:c:p:171-178
    DOI: 10.1016/j.frl.2019.04.001
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    More about this item

    Keywords

    Gold; Bitcoin; Hedge; Safe-haven; Quantile regression; EPU;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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