The role of uncertainty index in forecasting volatility of Bitcoin: Fresh evidence from GARCH-MIDAS approach

【Author】 Xia, Yufei; Sang, Chong; He, Lingyun; Wang, Ziyao

【Source】FINANCE RESEARCH LETTERS

【影响因子】9.848

【Abstract】We shed light on the role of Economic Policy Uncertainty (EPU) and Cryptocurrency Uncertainty (UCRY) indices in forecasting Bitcoin volatility. The empirical results of in-sample estimations demonstrate that the global EPU index and UCRY indices exhibit significantly negative and positive effects on long-term Bitcoin volatility, respectively. Moreover, the out-of-sample vali-dation reveals that One-Side Asymmetric GARCH-MIDAS with UCRY price index is the best -performing model and forecasting models incorporating the UCRY indices significantly outper-form models with global and national EPUs in out-of-sample forecasting. Considering its scarce application, UCRY indices become a promising data source in guiding Bitcoin trading behaviors.

【Keywords】Volatility; Economic policy uncertainty; Cryptocurrency uncertainty; Cryptocurrency; Bitcoin; GARCH-MIDAS

【发表时间】2023 MAR

【收录时间】2023-03-26

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