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Examination Of The Impacts Of Cryptocurrency Uncertainty On Exchange-Traded Funds

Author

Listed:
  • IMEN OMRI

    (Department of Finance, Law and Business School, Tunisia)

  • OGUZHAN OZCELEBI

    (Faculty of Economics, Department of Economics, Istanbul University. Beyazit Campus, 34542 Beyazit, Istanbul, Turkey)

Abstract

In this paper, we use quantile-based analysis and nonlinear conditional autoregressive value-at-risk (CAViaR) model to investigate how cryptocurrency price and policy uncertainty indexes affect exchange traded funds (ETFs) investing in equity securities of companies operating in various disruptive innovation sectors and related to digital assets and blockchain technology. Results of the quantile-on-quantile (QQ) estimates and quantile regression reveal that cryptocurrency price and policy uncertainty generally have a negative impact on the globally traded ETFs suggesting that the changes in cryptocurrency uncertainty lead to destabilizing effects in the ETF market. Moreover, we find that the impact of cryptocurrency uncertainty is asymmetric depending on each quantile of ETF returns even though each ETF is influenced in the same way by each uncertainty index, indicating that cryptocurrency price uncertainty and cryptocurrency policy uncertainty have common effects on the ETF market. A linear quantile causality analysis indicated that there is evidence of a significant causality running from the considered uncertainty indexes to the ETF returns, revealing that cryptocurrency price and policy uncertainty have a significant information value in explaining expected ETF returns. On the other hand, we find that linear quantile models outperform nonlinear CAViaR models in quantiles that are only moderate.

Suggested Citation

  • Imen Omri & Oguzhan Ozcelebi, 2024. "Examination Of The Impacts Of Cryptocurrency Uncertainty On Exchange-Traded Funds," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 69(08), pages 2687-2712, December.
    • Handle: RePEc:wsi:serxxx:v:69:y:2024:i:08:n:s0217590823500509
    DOI: 10.1142/S0217590823500509
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    More about this item

    Keywords

    ETF; cryptocurrency uncertainty; digital assets; quantile regression; co-movement;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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