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The Predictability between Bitcoin and US Technology Stock Returns: Granger Causality in Mean, Variance, and Quantile

Author

Listed:
  • Elie Bouri

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

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

  • Chi Keung Marco Lau

    (Department of Accountancy, Finance and Economics, Huddersfield Business School, University of Huddersfield, Queensgate, United Kingdom)

  • David Roubaud

    (Montpellier Business School, Montpellier, France)

Abstract

In this chapter, we test for Granger causality in mean, variance, and quantile between Bitcoin prices and various US stock indices belonging to the overall stock market and the sector of information technology and its various industries. Using daily data covering the period 18 August 2011 to 15 April 2019, results from the application of the test of Chen (2016) show the following. Unsurprisingly, there is evidence of a relationship between Bitcoin and US tech stock indices. Specifically, there is clear evidence of predictability between Bitcoin and US tech stocks, which seems to vary across quantiles. US stocks Granger cause Bitcoin return, but this is not the case for other stock indices. Generally, Granger causality from one market to another is insignificant in both mean and variance. However, when one market is in its bear state, the other become more volatile. Furthermore, there is evidence of casualties when one market is in its bear market state, while the other is in its bear or bull market state. Our findings suggest the need to use unconventional methods such as the Granger causality in moments of Chen (2016), otherwise, it might be wrongly apparent that Bitcoin and US (tech) stock indices are independent.

Suggested Citation

  • Elie Bouri & Rangan Gupta & Chi Keung Marco Lau & David Roubaud, 2019. "The Predictability between Bitcoin and US Technology Stock Returns: Granger Causality in Mean, Variance, and Quantile," Working Papers 201971, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201971
    as

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