Economic Policy Uncertainty and the Bitcoin market

Posted: 3 Sep 2019

See all articles by Toan Luu Duc Huynh

Toan Luu Duc Huynh

Ho Chi Minh City University of Economics and Finance; WHU - Otto Beisheim School of Management

Mei Wang

WHU - Otto Beisheim School of Management

Xuan Vinh Vo

University of Economics Ho Chi Minh City; French-Vietnamese Center for Management Education (CFVG) in Ho Chi Minh City

Date Written: August 27, 2019

Abstract

This paper investigates the prediction power of Economic Policy Uncertainty on three aspects of Bitcoin, particularly the return, volume, and volatility. We employed the Transfer Entropy model with two different regimes: (i) stationary and (ii) non-stationary assumption. We constructed different algorithm calculations for returns, volume, and volatility to test how this proxy impacts. We find that the Global Economic Policy Uncertain negatively causes Bitcoin volumes and volatilities. Therefore, under uncertain regimes, investors are risk-averse to trade, which makes the market less volatile. Our findings confirm the existence of pessimistic risk premium and the theory of deteriorating liquidity under uncertainties in the Bitcoin market.

Keywords: Economic Policy Uncertainty (EPU), Bitcoin, return, volume, volatility

JEL Classification: G15, C32, D81, G10

Suggested Citation

Huynh, Toan Luu Duc and Wang, Mei and Vo, Xuan Vinh, Economic Policy Uncertainty and the Bitcoin market (August 27, 2019). Available at SSRN: https://ssrn.com/abstract=3443424

Toan Luu Duc Huynh (Contact Author)

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen D├Čnh Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Mei Wang

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallender, 56179
Germany

Xuan Vinh Vo

University of Economics Ho Chi Minh City ( email )

Ho Chi Minh City, Ho Chi Minh City
Vietnam

HOME PAGE: http://www.ueh.edu.vn

French-Vietnamese Center for Management Education (CFVG) in Ho Chi Minh City

91 Ba Thang Hai Street
District 10
Ho Chi Minh City
Vietnam

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