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How Does Uncertainty Affect Volatility Correlation between Financial Assets? Evidence from Bitcoin, Stock and Gold

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  • Zheng-Zheng Li
  • Chi-Wei Su
  • Meng Nan Zhu

Abstract

This paper deciphers the correlation of volatility between Bitcoin, stock and gold, in the context of uncertainty. The wavelet analysis results indicate that the selected assets are primarily positively correlated with each other, specifically in periods when the economic policy uncertainty (EPU) is high. Furthermore, the logit regression confirms that the EPU and categorial EPU indices have heterogeneous effects on the interdependence between Bitcoin, the S&P 500 and gold. Therefore, our findings provide insights for policy-makers to reduce the adverse impact of uncertainty on financial asset volatility.

Suggested Citation

  • Zheng-Zheng Li & Chi-Wei Su & Meng Nan Zhu, 2022. "How Does Uncertainty Affect Volatility Correlation between Financial Assets? Evidence from Bitcoin, Stock and Gold," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(9), pages 2682-2694, July.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:9:p:2682-2694
    DOI: 10.1080/1540496X.2021.2009339
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    Cited by:

    1. Wang, Kai-Hua & Zhao, Yan-Xin & Jiang, Cui-Feng & Li, Zheng-Zheng, 2022. "Does green finance inspire sustainable development? Evidence from a global perspective," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 412-426.
    2. Li, Zheng-Zheng & Meng, Qin & Zhang, Linling & Lobont, Oana-Ramona & Shen, Yijuan, 2023. "How do rare earth prices respond to economic and geopolitical factors?," Resources Policy, Elsevier, vol. 85(PA).
    3. Yuan, Xi & Qin, Meng & Zhong, Yifan & Nicoleta-Claudia, Moldovan, 2023. "Financial roles in green investment based on the quantile connectedness," Energy Economics, Elsevier, vol. 117(C).
    4. Jinghua Wang & Geoffrey M. Ngene & Yan Shi & Ann Nduati Mungai, 2023. "An Investigation of the Predictability of Uncertainty Indices on Bitcoin Returns," JRFM, MDPI, vol. 16(10), pages 1-12, October.

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