Elie Bouri

Bio: Elie Bouri is an academic researcher from Lebanese American University. The author has contributed to research in topics: Volatility (finance) & Stock (geology). The author has an hindex of 41, co-authored 226 publications receiving 6496 citations. Previous affiliations of Elie Bouri include Holy Spirit University of Kaslik & University of Economics, Ho Chi Minh City.

On the hedge and safe haven properties of Bitcoin: Is it really more than a diversifier?

Abstract: This paper uses a dynamic conditional correlation model to examine whether Bitcoin can act as a hedge and safe haven for major world stock indices, bonds, oil, gold, the general commodity index and the US dollar index. Daily and weekly data span from July 2011 to December 2015. Overall, the empirical results indicate that Bitcoin is a poor hedge and is suitable for diversification purposes only. However, Bitcoin can only serve as a strong safe haven against weekly extreme down movements in Asian stocks. We also show that Bitcoin hedging and safe haven properties vary between horizons.

Can volume predict Bitcoin returns and volatility? A quantiles-based approach

Abstract: Prior studies on the price formation in the Bitcoin market consider the role of Bitcoin transactions at the conditional mean of the returns distribution. This study employs in contrast a non-parametric causality-in-quantiles test to analyse the causal relation between trading volume and Bitcoin returns and volatility, over the whole of their respective conditional distributions. The nonparametric characteristics of our test control for misspecification due to nonlinearity and structural breaks, two features of our data that cover 19th December 2011 to 25th April 2016. The causality-in-quantiles test reveals that volume can predict returns – except in Bitcoin bear and bull market regimes. This result highlights the importance of modelling nonlinearity and accounting for the tail behaviour when analysing causal relationships between Bitcoin returns and trading volume. We show, however, that volume cannot help predict the volatility of Bitcoin returns at any point of the conditional distribution.

Does Bitcoin hedge global uncertainty? Evidence from wavelet-based quantile-in-quantile regressions

Abstract: We examine whether Bitcoin can hedge global uncertainty, measured by the first principal component of the VIXs of 14 developed and developing equity markets. After decomposing Bitcoin returns into various frequencies, i.e., investment horizons, and given evidence of heavy-tails, we employ quantile regression. We reveal that Bitcoin does act as a hedge against uncertainty: it reacts positively to uncertainty at both higher quantiles and shorter frequency movements of Bitcoin returns. Further, we use quantile-on-quantile regression and identify that hedging is observed at shorter investment horizons, and at both lower and upper ends of Bitcoin returns and global uncertainty.

Does Bitcoin hedge global uncertainty? Evidence from wavelet-based quantile-in-quantile regressions

Abstract: In this study, we analyse whether Bitcoin can hedge uncertainty using daily data for the period of 17th March, 2011, to 7th October, 2016. Global uncertainty is measured by the first principal component of the VIXs of 14 developed and developing equity markets. We first use wavelets to decompose Bitcoin returns into various frequencies, i.e., investment horizons. Then, we apply standard OLS regressions and observe that uncertainty negatively affects raw Bitcoin return and its longer-term movements. However, given the heavy tails of the variables, we rely on quantile methods and reveal much more nuanced and interesting results. Quantile regressions indicate that Bitcoin does act as a hedge against uncertainty, that is, it reacts positively to uncertainty at both higher quantiles and shorter frequency movements of Bitcoin returns. Finally, when we use quantile-on-quantile regressions, we observe that hedging is observed at shorter investment horizons, and at both lower and upper ends of Bitcoin returns and global uncertainty.

Is Bitcoin a better safe-haven investment than gold and commodities?

Abstract: This paper addresses the timely question of whether Bitcoin exhibits a safe-haven property for stock market investments during extreme market conditions and whether such a property is similar to or different from that of gold and the general commodity index. We propose a new definition of a weak and strong safe-haven within a bivariate cross-quantilogram approach. This definition considers the lowest tails of both the safe-haven asset and the stock index. Our sample period spans from 19 July 2010 until 22 February 2018 and focuses on several stock market indices, including those of the US, China, and other developed and emerging economies. Our main results show that, at best, each of Bitcoin, gold, and the commodity index can be considered as a weak safe-haven asset in some cases. Rolling-window predictability analyses generally confirm those results and reveal that the safe-haven roles of Bitcoin, gold, and commodities are time-varying and differ across the stock market indices under study.

Market Liquidity: Asset Pricing with Liquidity Risk

Abstract: This paper solves explicitly a simple equilibrium model with liquidity risk. In our liquidityadjusted capital asset pricing model, a security s required return depends on its expected liquidity as well as on the covariances of its own return and liquidity with the market return and liquidity. In addition, a persistent negative shock to a security s liquidity results in low contemporaneous returns and high predicted future returns. The model provides a unified framework for understanding the various channels through which liquidity risk may affect asset prices. Our empirical results shed light on the total and relative economic significance of these channels and provide evidence of flight to liquidity. r 2005 Elsevier B.V. All rights reserved.

On the hedge and safe haven properties of Bitcoin: Is it really more than a diversifier?

Abstract: This paper uses a dynamic conditional correlation model to examine whether Bitcoin can act as a hedge and safe haven for major world stock indices, bonds, oil, gold, the general commodity index and the US dollar index. Daily and weekly data span from July 2011 to December 2015. Overall, the empirical results indicate that Bitcoin is a poor hedge and is suitable for diversification purposes only. However, Bitcoin can only serve as a strong safe haven against weekly extreme down movements in Asian stocks. We also show that Bitcoin hedging and safe haven properties vary between horizons.

Exploring the dynamic relationships between cryptocurrencies and other financial assets

Abstract: We analyse, in the time and frequency domains, the relationships between three popular cryptocurrencies and a variety of other financial assets. We find evidence of the relative isolation of these assets from the financial and economic assets. Our results show that cryptocurrencies may offer diversification benefits for investors with short investment horizons. Time variation in the linkages reflects external economic and financial shocks.

Volatility estimation for Bitcoin: A comparison of GARCH models

Abstract: We explore the optimal conditional heteroskedasticity model with regards to goodness-of-fit to Bitcoin price data. It is found that the best model is the AR-CGARCH model, highlighting the significance of including both a short-run and a long-run component of the conditional variance.