The Dynamic Relationships Among Economic Policy Uncertainty, Bitcoin, and the Stock Market

This study aims to explore the dynamic relationships among economic policy uncertainty (EPU), Bitcoin trading activity, and the NASDAQ index over the period from January 2, 2014, to March 21, 2023. Employing the dynamic conditional correlation–generalized autoregressive conditional heteroskedasticity (DCC‐GARCH) model, this research reveals significant time‐varying interdependencies between EPU and financial markets, with a specific focus on the Bitcoin sector. This paper extends the literature by examining EPU’s influence on trading volume and volatility spillovers during different market regimes and crisis events, including the COVID‐19 pandemic. The results demonstrate that the correlations between EPU and both Bitcoin and the NASDAQ index are dynamic and sensitive to market phases, with stronger effects observed during bull markets and heightened volatility during the pandemic. The findings provide new empirical evidence on the evolving role of EPU in shaping investor behavior and financial asset comovement. This study offers practical implications for investors, regulators, and policymakers, especially in designing risk management strategies under uncertainty.