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

【Author】 Bouteska, Ahmed; Mefteh-Wali, Salma; Dang, Trung

【Source】TECHNOLOGICAL FORECASTING AND SOCIAL CHANGE

【影响因子】10.884

【Abstract】In this paper, we examine the impact of investor sentiment on Bitcoin returns. Using a large dataset of messages discussed on social media and several financial indicators, we create a sentiment indicator based on computational text analysis and driven by the principal component analysis (PCA) method. We utilize a vector autoregressive analysis and other analytical methods to examine the sentiment index-bitcoin return nexus. Our findings reveal that the sentiment index is a strong predictor of cryptocurrency market returns in the short term. Furthermore, we confirm that during the COVID-19 pandemic, investors' sentiments significantly impacted Bitcoin returns. Our results show that the proposed sentiment index can generate excess returns for investors who utilize it as a return predictor. Our empirical findings suggest important policy implications.

【Keywords】Behavioral finance; Investor sentiment; Bitcoin; Cryptocurrencies; Textual analysis for sentiment analysis

【发表时间】2022 NOV

【收录时间】2022-12-18

【文献类型】实证数据

【主题类别】

区块链治理-市场治理-数字货币