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Testing for Asymmetric Nonlinear Short- and Long-Run Relationships between Bitcoin, Aggregate Commodity and Gold Prices

Author

Listed:
  • Elie Bouri

    (USEK Business School, Holy Spirit University of Kaslik (USEK), POB 446 Jounieh, Lebanon)

  • Rangan Gupta

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

  • Amine Lahiani

    (LEO, University of Orleans, Orléans – France, Montpellier Business School, Montpellier, France)

  • Muhammad Shahbaz

    (Montpellier Business School, Montpellier, France)

Abstract

Unlike prior studies, this study examines the nonlinear, asymmetric and quantile effects of aggregate commodity index and gold prices on the price of Bitcoin. Using daily data from July 17, 2010 to February 2, 2017, we employed several advanced autoregressive distributed lag (ARDL) models. The nonlinear ARDL approach was applied to uncover short- and longrun asymmetries, whereas the quantile ARDL was applied to account for a second type of asymmetry, known as the distributional asymmetry according to the position of a dependent variable within its own distribution. Moreover, we extended the nonlinear ARDL to a quantile framework, leading to a richer new model, which allows testing for distributional asymmetry while accounting for short- and long-run asymmetries. Overall, our results indicate the possibility to predict Bitcoin price movements based on price information from the aggregate commodity index and gold prices. Importantly, we report the nuanced result that most often the relations between bitcoin and aggregate commodity, on the one hand, and between bitcoin and gold, on the other, are asymmetric, nonlinear, and quantiles-dependent, suggesting the need to apply non-standard cointegration models to uncover the complexity and hidden relations between Bitcoin and asset classes.

Suggested Citation

  • Elie Bouri & Rangan Gupta & Amine Lahiani & Muhammad Shahbaz, 2017. "Testing for Asymmetric Nonlinear Short- and Long-Run Relationships between Bitcoin, Aggregate Commodity and Gold Prices," Working Papers 201760, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201760
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    References listed on IDEAS

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    More about this item

    Keywords

    Cointegration; Asymmetry; Nonlinearity; Quantile Dependence; Bitcoin; Commodity; Gold;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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