Empirical Study On The Hedging Ability Of Gold And Bitcoin Based On Geopolitical Risk

In recent years,great changes have taken place in World Geopolitics,which affect economic activities to a certain extent.Taking the prices of gold and bitcoin from August 2010 to February 2021 as the research object,this paper compares and analyzes the response effects of gold and bitcoin in response to geopolitical risk events.The main research contents are as follows:Firstly,this paper summarizes the research status of geopolitical risk,gold and bitcoin hedging risk,and introduces the bootstrap rolling causality test,GARCH model with dummy variables and quantile regression model.Secondly,test the data by judging the stationary nature of the data,and then explore their causality.When the causality of the whole sample is not significant,conduct parameter stability test and parameter random walk test.It is found that there is no significant correlation between gold price(Gold)and bitcoin price(BCP)and geopolitical risk index(GPR),However,the parameters in the model experienced sudden structural changes at the significance level of 1%,and LC statistical test found that the parameters did not follow the random walk process.Then,the bootstrap rolling causality test of GPR on gold and bitcoin is carried out.The prices of gold and bitcoin are affected by geopolitical events to a certain extent.The positive impact of GPR on both shows that gold and bitcoin can be regarded as an asset to avoid the impact of geopolitical events,which also proves that both gold and bitcoin can become winners after the gunshot.Further,as to whether gold or BCP can become the Granger reason of GPR,the estimated geopolitical wind direction of gold and BCP in the sub-sample interval reflects the geopolitical situation in advance.Finally,GARCH model and quantile regression model with dummy variables are established to study the hedging ability of two assets under average market conditions and extreme market conditions respectively.Gold and bitcoin can act as weak hedging and weak hedging assets to resist uncertainty.By comparing and analyzing the reactions of the two assets under different market conditions,it provides investors with portfolio reference at different risk levels.