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The Relationship Between BITCOIN and Other Financial Instruments: An Examination With VAR Models
Semih Yilmazer, Asli Aybars, Gözde Bozkurt
Pages - 31 - 47     |    Revised - 17-01-2021     |    Published - 01-09-2021
Volume - 0   Issue - 0    |    Publication Date -   Table of Contents
Cryptocurrencies, Vector Autoregression, Bitcoin Returns, Bitcoin Volatility.
Bitcoin has become one of the most popular financial assets in the world because it has an unregulated nature and does not require any central authority. However, there has been an ongoing debate about Bitcoin classification. Whatever classification Bitcoin is subject to, it has become a significant component of investors’ portfolios. Accordingly, the returns of this instrument are an important matter of concern for both practitioners and academicians. In this study, we aim to analyze the effect of other financial assets on Bitcoin returns to figure out whether there is a hedging opportunity or not. In this manner, we used Vector Autoregression (VAR) model to test whether the associated variables; namely, gold, euro, and S&P 500 influence Bitcoin returns. The results of the study revealed that Bitcoin returns had no relationship with other financial assets in the long term. In other words, it was determined that financial assets did not affect Bitcoin prices. It was also found that Bitcoin had a deterministic process rather than a stochastic one. Hence, it is thought that Bitcoin should be examined by using VAR models instead of financial models such as ARMA, ARCH, and GARCH.
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Mr. Semih Yilmazer
Faculty of Economics and Administrative Sciences, Yildiz Technical University - Turkey
Dr. Asli Aybars
Faculty of Business Administration, Marmara University - Turkey
Dr. Gözde Bozkurt
Faculty of Economics and Administrative Sciences, Beykent University - Turkey

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