Do Uncertainties and Risks Have an Impact on Cryptocurrency Returns? Evidence from the Symmetric and Asymmetric Fourier Quantile Causality Test

Kılcı E. N., Yılancı V.

ESTUDIOS DE ECONOMIA, sa.Forthcoming, ss.1-15, 2023 (SSCI)

  • Yayın Türü: Makale / Tam Makale
  • Basım Tarihi: 2023
  • Dergi Adı: ESTUDIOS DE ECONOMIA
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, Academic Search Premier, Fuente Academica Plus, International Bibliography of Social Sciences, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit, PAIS International, Directory of Open Access Journals, DIALNET
  • Sayfa Sayıları: ss.1-15
  • Çanakkale Onsekiz Mart Üniversitesi Adresli: Evet

Özet

This paper explores the impact of uncertainties and risks on the returns of cryptocurrencies by

considering the two dimensions of uncertainty sourcing from economic policy uncertainty and

geopolitical risk. Therefore, we analyze whether there is a causality from the global economic

policy uncertainty (GEPU) and geopolitical risk (GPR) to the cryptocurrency returns in the

period from 2015:01 through 2023:05. In our analysis, we use the GEPU and GPR indexes as

independent variables and the historical values of Bitcoin, Ethereum, Litecoin, Ripple, Monero,

and Dash as dependent variables. We employ the Fourier augmented causality test considering

the original series, and also the positive and negative components of the series. Our findings

reveal that the GPR has predictive power for all cryptocurrencies while GEPU has not

predictive power for only Bitcoin. Furthermore, we find evidence of the causality nexus that

runs from negative shocks of GEPU to the negative shocks of Litecoin and Ripple, and from the

negative shocks of GPR to the negative shocks of Litecoin and Monero indicating when there

are significant decreases at the GEPU, these values can be used to predict the decreases of

Litecoin and Ripple. Similarly, we can also imply it for the causality relationship from GPR to

Litecoin and Monero. When we consider there might be a causal relationship not only between

shocks of the same type but also between different types of shocks we find that there is

unidirectional causality from negative shocks of GEPU to the positive shocks of Dash,

Ethereum, and Monero at the high return phase, and from positive shocks of GEPU to the

negative shocks of Ethereum, and from positive shocks of GPR to the negative components of

Bitcoin, Ethereum, and Ripple at the bearish market conditions