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

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Authors

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

Journal Title

Journal ISSN

Volume Title

Publisher

Elsevier

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.

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Keywords

Bitcoin, Global financial stress index, Dependence, Copula, Quantiles

Sustainable Development Goals

Citation

Bouri, E., Gupta, R., Lau, C.K.M. et al. 2018, 'Bitcoin and global financial stress : a copula-based approach to dependence and causality in the quantiles', The Quarterly Review of Economics and Finance, vol. 69, pp. 297-307.