Publication Date

2024

Document Type

Dissertation/Thesis

First Advisor

Anderson, Evan

Degree Name

Ph.D. (Doctor of Philosophy)

Legacy Department

Department of Economics

Abstract

This dissertation comprises three essays centered on computational and financial economics, addressing the economic implications of the COVID-19 pandemic, the interplay between monetary policy and the cryptocurrency market, and the strategies for cryptocurrency portfolio optimization.

In the first essay, the spotlight is cast on the U.S. government's response to the COVID-19 pandemic and its subsequent economic ramifications. The study meticulously assesses the implemented uniform pandemic control policies and contrasts them with potential targeted measures. These targeted strategies take into account the differential effects of the virus on various age demographics. By employing the adjusted SEQIHR model as a tool for analyzing the daily death data from the pandemic, the research provides compelling evidence. The findings suggest that if a more targeted policy approach were adopted, the United States might have witnessed a notable reduction in both GDP loss and the death rate, potentially leading to a significant reduction in lives lost, estimated at up to 280,000 for the year 2020 alone.

The second essay navigates the complex interplay between monetary policies and the burgeoning cryptocurrency sector, particularly in the aftermath of the COVID-19 pandemic. This segment rigorously examines how monetary policies, especially those designed to combat post-pandemic inflation, influence the cryptocurrency market, with a specific focus on Bitcoin. Utilizing the Markov Switching Vector Autoregressive (MSVAR) Model, the essay investigates the nuanced dynamics of Bitcoin's response to Monetary Policy Uncertainty (MPU) and Federal Open Market Committee (FOMC) interest rate announcements. The findings illuminate the significant, yet intricate, impact of these policies on Bitcoin’s returns and volatility. The study demonstrates that despite its decentralized nature, Bitcoin is not insulated from the fluctuations and uncertainties of the global financial system. By offering a detailed analysis of Bitcoin's behavior in response to monetary policies, this essay provides valuable insights for investors, policymakers, and researchers. It underscores the critical need to understand the financial market's new digital frontier and its susceptibility to traditional economic influences.

Finally, the third essay is dedicated to the analysis of portfolio optimization strategies in the context of cryptocurrencies, with a specific emphasis on Bitcoin. This study examines the integration of Bitcoin into a well-diversified portfolio, utilizing Mean-Variance and Conditional Value at Risk (Mean-CVaR) optimization methods. The research reveals that the traditional Mean-Variance approach, while simple and historically significant, falls short in accurately assessing the risk dynamics of cryptocurrencies, due to its reliance on normal distribution assumptions. Conversely, the Mean-CVaR method proves more adept at capturing the unique risk-return profile of cryptocurrencies, particularly Bitcoin. The findings indicate that including Bitcoin in various portfolio strategies enhances returns without a proportional increase in risk, as evidenced by stable or reduced CVaR and improved Sharpe Ratios. This study not only highlights Bitcoin's potential as a beneficial component in diversified portfolios but also underscores the importance of selecting appropriate optimization techniques in the context of complex assets like cryptocurrencies.

Extent

155 pages

Language

en

Publisher

Northern Illinois University

Rights Statement

In Copyright

Rights Statement 2

NIU theses are protected by copyright. They may be viewed from Huskie Commons for any purpose, but reproduction or distribution in any format is prohibited without the written permission of the authors.

Media Type

Text

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