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Bitcoin and Global Financial Stress: A Copula-Based Approach to Dependence and Causality-in-Quantiles

Author

Listed:
  • Elie Bouri

    (USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

  • Chi Keung Marco Lau

    (Newcastle Business School, Northumbria University, Newcastle, UK)

  • David Roubaud

    (Energy and Sustainable Development (ESD), Montpellier Business School, Montpellier, France)

  • Shixuan Wang

    (Cardiff Business School, Cardiff University, CF10 3EU, United Kingdom)

Abstract

We apply different techniques and uncover the quantile conditional dependence between the global financial stress index and Bitcoin returns from March 18, 2011, to October 7, 2016. The results from the copula-based dependence show evidence of right-tail dependence between the global financial stress index and Bitcoin returns. We focus on the conditional quantile dependence and indicate that the global financial stress index strongly Granger-causes Bitcoin returns at the left and middle tail of the distribution of the Bitcoin returns, conditional on the global financial stress index. Finally, we use a bivariate cross-quantilogram approach and show only limited directional predictability from the global financial stress index to Bitcoin returns in the medium term, for which Bitcoin can act as a safe haven against global financial stress.

Suggested Citation

  • Elie Bouri & Rangan Gupta & Chi Keung Marco Lau & David Roubaud & Shixuan Wang, 2017. "Bitcoin and Global Financial Stress: A Copula-Based Approach to Dependence and Causality-in-Quantiles," Working Papers 201750, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201750
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Bitcoin; global financial stress index; dependence; copula; quantiles;
    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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