Predictive power of investor sentiment for Bitcoin returns: Evidence from COVID-19 pandemic

Bouteska, Ahmed; Mefteh‐Wali, Salma; Dang, Trung Thanh

doi:10.1016/j.techfore.2022.121999

Cited by 28 publications

(15 citation statements)

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“…Overall, this paper concludes that pandemic attention can predict Bitcoin returns (volatility) in both statistical forecasts and economics forecasts. This phenomenon may be attributed to the inefficiency of the Bitcoin futures market ( 103 ), making it predictable ( 18 , 30 , 39 ). This paper further provides a new predictor.…”

Section: The Results Of Out-of-sample Forecasts and Its Robustness Testmentioning

confidence: 99%

“…There are two contributions to this paper. First, it enriches the existing literature on the impact of the pandemic on financial markets, specifically the Bitcoin market ( 18 , 31 , 78 ). This paper finds that pandemic attention significantly affects Bitcoin returns and volatility, and that predicting Bitcoin returns and volatility is more accurate when pandemic attention is taken into account.…”

Section: Introduction and Literature Reviewmentioning

confidence: 84%

“…Moreover, pandemic attention is constructed globally rather than distinguishing different countries (or regions), making it difficult to investigate the variances in the impact of the pandemic on investors from different geographic categories ( 15 ). Thus, further research can include more related keywords ( 104 ) and introduce the construction methods of Principal Component Analysis ( 18 ) and Partial Least Squares regression ( 80 ) as well as construct pandemic attention indexes of different regions. Second, pandemic attention does not make a distinction between its positive and negative nature.…”

Section: Discussionmentioning

confidence: 99%

“…Some studies have focused on trading-based or technique indices that are closely related to the features of Bitcoin ( 39 ), such as supply and demand conditions ( 55 ), mining costs ( 56 ), trading volume ( 57 ), the daily difference between high and low price ( 58 ), and market size ( 59 ). Recently, more attention has been paid to exogenous determinants of Bitcoin, including economic policy uncertainty ( 32 ), global geopolitical risks ( 33 ), investor sentiment ( 18 , 60 ), macroeconomic conditions ( 55 ), and the financial market ( 34 , 55 ). Notably, a growing body of literature has explored the impact of investor attention on Bitcoin returns and volatility ( 12 , 30 , 39 , 61–63 ).…”

Section: Introduction and Literature Reviewmentioning

confidence: 99%

“…Bitcoin, as an essential asset for portfolio diversification, has attracted increasing attention from investors all over the world due to its volatility persistence, possible hedging properties (18,19), and potential safe-haven capabilities (20)(21)(22). During the COVID-19 pandemic, lockdowns and social distancing measures have disrupted traditional in-person goods and services (23), driving investors to demand more digital goods and digital finance (24)(25)(26).…”

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confidence: 99%

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The COVID-19 pandemic and Bitcoin: Perspective from investor attention

Wan

Zhu

2023

Front. Public Health

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The response of the Bitcoin market to the novel coronavirus (COVID-19) pandemic is an example of how a global public health crisis can cause drastic market adjustments or even a market crash. Investor attention on the COVID-19 pandemic is likely to play an important role in this response. Focusing on the Bitcoin futures market, this paper aims to investigate whether pandemic attention can explain and forecast the returns and volatility of Bitcoin futures. Using the daily Google search volume index for the “coronavirus” keyword from January 2020 to February 2022 to represent pandemic attention, this paper implements the Granger causality test, Vector Autoregression (VAR) analysis, and several linear effects analyses. The findings suggest that pandemic attention is a granger cause of Bitcoin returns and volatility. It appears that an increase in pandemic attention results in lower returns and excessive volatility in the Bitcoin futures market, even after taking into account the interactive effects and the influence of controlling other financial markets. In addition, this paper carries out the out-of-sample forecasts and finds that the predictive models with pandemic attention do improve the out-of-sample forecast performance, which is enhanced in the prediction of Bitcoin returns while diminished in the prediction of Bitcoin volatility as the forecast horizon is extended. Finally, the predictive models including pandemic attention can generate significant economic benefits by constructing portfolios among Bitcoin futures and risk-free assets. All the results demonstrate that pandemic attention plays an important and non-negligible role in the Bitcoin futures market. This paper can provide enlightens for subsequent research on Bitcoin based on investor attention sparked by public emergencies.

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Section: The Results Of Out-of-sample Forecasts and Its Robustness Testmentioning

confidence: 99%

Section: Introduction and Literature Reviewmentioning

confidence: 84%

Section: Discussionmentioning

confidence: 99%

Section: Introduction and Literature Reviewmentioning

confidence: 99%

mentioning

confidence: 99%

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The COVID-19 pandemic and Bitcoin: Perspective from investor attention

Wan

Zhu

2023

Front. Public Health

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Understanding Investor Sentiment: Analyzing Its Influence on Stock and Cryptocurrency Markets During the Russia–Ukraine War

Chowdhury,

Dhar

2024

Thunderbird Intl Bus Rev

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This paper examines the shifts in investor sentiment during the Russia–Ukraine war and its consequent impact on market volatility. By employing a comprehensive dataset that includes the S&P 500 index, historical Bitcoin prices, the Investor Sentiment Index, the Industrial Production Index, and the US Consumer Price Index, this study applies several econometric models such as generalized autoregressive conditional heteroskedasticity (GARCH) models, regression analyses, vector error correction models (VECM), and the Granger causality model. The analysis spans from January 2021 to March 2023. The findings indicate that investor sentiment significantly influences returns in both stock and cryptocurrency markets, having a positive effect. These results underscore the importance for investors and policymakers to monitor investor sentiment during periods of conflict to understand its potential impact on financial markets. This research offers valuable insights that can guide investment decisions and inform policy interventions.

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