Bitcoin and global financial stress : A copula-based approach to dependence and causality in the quantiles

Elie Bouri; Rangan Gupta; Chi Keung Marco Lau; David Roubaud; Shixuan Wang

doi:10.1016/j.qref.2018.04.003

Bitcoin and global financial stress : A copula-based approach to dependence and causality in the quantiles

Elie Bouri, Rangan Gupta, Chi Keung Marco Lau, David Roubaud, Shixuan Wang

Research output: Contribution to journal › Article › peer-review

47 Citations (Scopus)

Abstract

We apply different techniques and uncover the quantile conditional dependence between the global financial stress index and Bitcoin returns from July 18, 2010, to December 29, 2017. 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 right 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.

Original language	English
Pages (from-to)	297-307
Number of pages	11
Journal	Quarterly Review of Economics and Finance
Volume	69
DOIs	https://doi.org/10.1016/j.qref.2018.04.003
Publication status	Published - 12 Aug 2018

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© 2018 Board of Trustees of the University of Illinois

Copyright:
Copyright 2018 Elsevier B.V., All rights reserved.

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10.1016/j.qref.2018.04.003

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title = "Bitcoin and global financial stress : A copula-based approach to dependence and causality in the quantiles",

abstract = "We apply different techniques and uncover the quantile conditional dependence between the global financial stress index and Bitcoin returns from July 18, 2010, to December 29, 2017. 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 right 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.",

author = "Elie Bouri and Rangan Gupta and Lau, \{Chi Keung Marco\} and David Roubaud and Shixuan Wang",

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AU - Bouri, Elie

AU - Gupta, Rangan

AU - Lau, Chi Keung Marco

AU - Roubaud, David

AU - Wang, Shixuan

PY - 2018/8/12

Y1 - 2018/8/12

N2 - We apply different techniques and uncover the quantile conditional dependence between the global financial stress index and Bitcoin returns from July 18, 2010, to December 29, 2017. 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 right 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.

AB - We apply different techniques and uncover the quantile conditional dependence between the global financial stress index and Bitcoin returns from July 18, 2010, to December 29, 2017. 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 right 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.

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DO - 10.1016/j.qref.2018.04.003

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SN - 1062-9769

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SP - 297

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JO - Quarterly Review of Economics and Finance

JF - Quarterly Review of Economics and Finance

ER -

Bitcoin and global financial stress : A copula-based approach to dependence and causality in the quantiles

Abstract

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