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Elie Bouri, Rangan Gupta, Chi keung marco Lau and David Roubaud
 
''Risk aversion and Bitcoin returns in extreme quantiles''
( 2021, Vol. 41 No.3 )
 
 
We study whether level of risk aversion can be used to predict Bitcoin returns using copulas and quantile-based models. We find evidence of predictability when the market return is at extreme quantiles. Further analyses show that the cross-quantilogram is similar when risk aversion is at the low or medium level for various quantiles of Bitcoin returns. The predictability is positive when the risk aversion is at very low level. However, predictability becomes negative when both the risk aversion and Bitcoin returns are very high, suggesting that when risk aversion and Bitcoin returns are at very high levels, Bitcoin is less likely to have large gains.
 
 
Keywords: Risk-aversion; Bitcoin returns; price predictability; copulas; quantiles
JEL: C2 - Single Equation Models; Single Variables: General
D8 - Information, Knowledge, and Uncertainty: General
 
Manuscript Received : Sep 17 2021 Manuscript Accepted : Sep 17 2021

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