Geopolitical risk, uncertainty and Bitcoin investment

Md Al Mamun; Gazi Salah Uddin; Muhammad Tahir Suleman; Sang Hoon Kang

doi:10.1016/j.physa.2019.123107

Geopolitical risk, uncertainty and Bitcoin investment

Md Al Mamun
, Gazi Salah Uddin
, Muhammad Tahir Suleman
, Sang Hoon Kang^*

^*Corresponding author for this work

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

132 Scopus citations

Abstract

We investigate the impact of geopolitical risk, global and US economic policy uncertainty on the structure of Bitcoin correlation with various financial and commodities asset classes. We further investigate the impact of the aforementioned factors on the volatility and risk premium of Bitcoin investment. We find that both geopolitical risk and global economic policy uncertainty command a risk premium, particularly in distress market conditions. Moreover, during the period of high policy uncertainty and worsening economic conditions, Bitcoin investors can only hedge their portfolio with gold, not with other financial assets. Our results highlight that the effect of geopolitical risk, global and US economic policy uncertainty is far more significant during unfavorable economic conditions.

Original language	English
Article number	123107
Journal	Physica A: Statistical Mechanics and its Applications
Volume	540
DOIs	https://doi.org/10.1016/j.physa.2019.123107
State	Published - 15 Feb 2020
Externally published	Yes

Bibliographical note

Publisher Copyright:
© 2019

Keywords

Bitcoin
Economic policy uncertainty
Geopolitical risk
Risk premia

ASJC Scopus subject areas

Statistical and Nonlinear Physics
Statistics and Probability

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10.1016/j.physa.2019.123107

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title = "Geopolitical risk, uncertainty and Bitcoin investment",

abstract = "We investigate the impact of geopolitical risk, global and US economic policy uncertainty on the structure of Bitcoin correlation with various financial and commodities asset classes. We further investigate the impact of the aforementioned factors on the volatility and risk premium of Bitcoin investment. We find that both geopolitical risk and global economic policy uncertainty command a risk premium, particularly in distress market conditions. Moreover, during the period of high policy uncertainty and worsening economic conditions, Bitcoin investors can only hedge their portfolio with gold, not with other financial assets. Our results highlight that the effect of geopolitical risk, global and US economic policy uncertainty is far more significant during unfavorable economic conditions.",

keywords = "Bitcoin, Economic policy uncertainty, Geopolitical risk, Risk premia",

author = "\{Al Mamun\}, Md and Uddin, \{Gazi Salah\} and Suleman, \{Muhammad Tahir\} and Kang, \{Sang Hoon\}",

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doi = "10.1016/j.physa.2019.123107",

language = "English",

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AU - Al Mamun, Md

AU - Uddin, Gazi Salah

AU - Suleman, Muhammad Tahir

AU - Kang, Sang Hoon

PY - 2020/2/15

Y1 - 2020/2/15

N2 - We investigate the impact of geopolitical risk, global and US economic policy uncertainty on the structure of Bitcoin correlation with various financial and commodities asset classes. We further investigate the impact of the aforementioned factors on the volatility and risk premium of Bitcoin investment. We find that both geopolitical risk and global economic policy uncertainty command a risk premium, particularly in distress market conditions. Moreover, during the period of high policy uncertainty and worsening economic conditions, Bitcoin investors can only hedge their portfolio with gold, not with other financial assets. Our results highlight that the effect of geopolitical risk, global and US economic policy uncertainty is far more significant during unfavorable economic conditions.

AB - We investigate the impact of geopolitical risk, global and US economic policy uncertainty on the structure of Bitcoin correlation with various financial and commodities asset classes. We further investigate the impact of the aforementioned factors on the volatility and risk premium of Bitcoin investment. We find that both geopolitical risk and global economic policy uncertainty command a risk premium, particularly in distress market conditions. Moreover, during the period of high policy uncertainty and worsening economic conditions, Bitcoin investors can only hedge their portfolio with gold, not with other financial assets. Our results highlight that the effect of geopolitical risk, global and US economic policy uncertainty is far more significant during unfavorable economic conditions.

KW - Bitcoin

KW - Economic policy uncertainty

KW - Geopolitical risk

KW - Risk premia

UR - https://www.scopus.com/pages/publications/85073711041

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DO - 10.1016/j.physa.2019.123107

M3 - Article

AN - SCOPUS:85073711041

SN - 0378-4371

VL - 540

JO - Physica A: Statistical Mechanics and its Applications

JF - Physica A: Statistical Mechanics and its Applications

M1 - 123107

ER -

Geopolitical risk, uncertainty and Bitcoin investment

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

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