Time-Varying Nexus between Investor Sentiment and Cryptocurrency Market: New Insights from a Wavelet Coherence Framework

Hashem A. AlNemer, Besma Hkiri and Muhammed Asif Khan
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Hashem A. AlNemer: Department of Finance and Economics, College of Business, University of Jeddah, Asfan Road 2749, Jeddah 23890, Saudi Arabia
Besma Hkiri: Department of Finance and Economics, College of Business, University of Jeddah, Asfan Road 2749, Jeddah 23890, Saudi Arabia
Muhammed Asif Khan: Department of Management Sciences, University of Swabi, Khyber Pakhtunkhwa 23430, Pakistan

JRFM, 2021, vol. 14, issue 6, 1-19

Abstract: This study attempts to investigate the nexus between investor sentiment and cryptocurrencies prices. Our empirical investigation merges bivariate and multivariate wavelet tools to examine the investor sentiment nexus to inter-cryptocurrencies prices. The study outcomes show that the Sentix Investor Confidence index provides significant information in explaining long-term changes in Bitcoin and Litecoin prices. Moreover, the findings generated from the multiple wavelet coherence illustrate the simultaneous contribution of cryptocurrencies and the Sentix Investor Confidence index in explaining the Bitcoin index movement across frequencies and over horizons, especially during bubble burst periods. The study also suggests a time-dependent relationship of Bitcoin prices with alternative cryptocurrencies and the Sentix Investor Confidence index, mostly pronounced during the Bitcoin bubble. We discuss our results using GSV-based investor sentiment. Our findings remain robust and confirm the strong predictive power of investor sentiment in cryptocurrencies price movements over time and across scales.

Keywords: cryptocurrency; investor sentiment; wavelet coherence; Google-search volume (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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