Investigating cryptocurrencies: return, exchange volume and volatility with investor's attention and investor sentiment: an empirical analysis
In this research, I study the relationship between cryptocurrency’s (Bitcoin, Ethereum and Litecoin) return, exchange volume and volatility on one side, and investor’s attention and investor sentiment on the other. Together with search queries (Google Trends and Wikipedia queries) and a sentiment proxy (Reddit), I investigated the existence of any long run relationships, as well as the forecasting power of investor’s attention and investor sentiment on return, exchange volume and volatility. Furthermore, I also constructed an interaction between the search queries and the sentiment proxy to investigate any leverage effects. I use Ordinary Least Squares (OLS) as well as time-series analysis to evaluate the effects. The research consists of data starting from the 1st of September 2017 until the 7th of May 2018. The results showed solely consistent long run relationship between search queries and the cryptocurrencies’ exchange volume and volatility. Leverage effects seemed evident as well, but were mostly due to the search queries’ explaining variance. The sentiment proxy gave inconsistent results, showing no unilateral direction towards return, exchange volume nor volatility.
Faculteit der Managementwetenschappen