Publication date: Available online 11 January 2020
Source: Finance Research Letters
Author(s): Kuang-Chieh Yen, Hui-Pei Cheng
Abstract
We investigate the relationship between the economic policy uncertainty index (EPU) and cryptocurrency volatility. We find that a change in EPU of China predicts cryptocurrency volatility, but a change in the EPU of the U.S., Japan, or Korea has no such effect. Moreover, changes in the China EPU are negatively associated with Bitcoin and Litecoin future volatility, which may imply that Bitcoin and Litecoin are hedging tools against the EPU risk. However, changes in China EPU may not affect the cryptocurrency volatility after the Chinese government's regulation of crypto-trading.