An Analysis of the U.S. Individual Investor Sentiment Influence on Cryptocurrency Returns and Volatility

Sayim M., My N. Q.

ANNALS OF FINANCIAL ECONOMICS, vol.18, no.2, 2023 (ESCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 18 Issue: 2
  • Publication Date: 2023
  • Doi Number: 10.1142/s2010495222420015
  • Journal Name: ANNALS OF FINANCIAL ECONOMICS
  • Journal Indexes: Emerging Sources Citation Index (ESCI), Scopus
  • Keywords: Cryptocurrency, investor sentiment, VAR model, ASSET PRICES, STOCK, BITCOIN, RISK, INFLATION, EXCHANGE, MARKETS, NEWS, US
  • Marmara University Affiliated: Yes

Abstract

In this research, the U.S. investor sentiment effect on cryptocurrency returns and volatility is examined by separating it into irrational and rational parts. According to the data, an unforeseen rise in the rational part of U.S. individual investor attitude influences cryptocurrency returns statistically and positively. In other words, rational sentiment can result in rising cryptocurrency returns. Additionally, a positive significant association exists between cryptocurrency volatility and the rational part of the individual U.S. investor sentiment. The findings confirm the hypothesis that the behavior of rational investors who utilize and study the impact of economic factors on asset prices reduces cryptocurrency volatility.