Investor sentiment and the holiday effect in the cryptocurrency market: evidence from China

Pengcheng Zhang (), Kunpeng Xu (), Jian Huang () and Jiayin Qi ()
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Pengcheng Zhang: Shanghai International Studies University
Kunpeng Xu: Shanghai University of International Business and Economics
Jian Huang: Towson University
Jiayin Qi: Guangzhou University

Financial Innovation, 2024, vol. 10, issue 1, 1-36

Abstract: Abstract This study employs a fixed-effects model to investigate the holiday effect in the cryptocurrency market, using trading data for the top 100 cryptocurrencies by market capitalization on Coinmarketcap.com from January 1, 2017 to July 1, 2022. The results indicate that returns on cryptocurrencies increase significantly during Chinese holiday periods. Additionally, we use textual analysis to construct an investor sentiment indicator and find that positive investor sentiment boosts cryptocurrency market returns. However, when positive investor sentiment prevails in the cryptocurrency market, the holiday effect weakens, implying that positive investor sentiment attenuates the holiday effect. Robustness tests based on the Bitcoin market generate consistent results. Moreover, this study explores the mechanisms underlying the cryptocurrency holiday effect and examines the impact of epidemic transmission risk and heterogeneity characteristics on this phenomenon. These findings offer novel insights into the impact of Chinese statutory holidays on the cryptocurrency market and illuminate the role of investor sentiment in this market.

Keywords: Cryptocurrency; Holiday effect; Investor sentiment; Text analysis (search for similar items in EconPapers)
JEL-codes: C58 G12 G14 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1186/s40854-024-00639-x

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