Investor sentiment and cross-section of cryptocurrency returns

SeungOh Han

Journal of Behavioral and Experimental Finance, 2025, vol. 46, issue C

Abstract: This study investigates the cross-sectional pricing of sentiment risk in cryptocurrencies, defined as price sensitivity to changes in the Crypto Fear and Greed Index, from November 2018 to July 2024. Controlling for market, size, reversal, and liquidity factors, cryptocurrencies with intermediate sentiment risk yield a risk-adjusted weekly return 3.57% higher than those with low or high risk, revealing a negative sentiment risk premium in cryptocurrencies with high positive sentiment beta. This negative risk premium is partially attributed to overpayment for lottery-like cryptocurrencies. These findings remain robust across cross-sectional regressions, various quantile portfolios, alternative risk factors, and diverse illiquidity measures.

Keywords: Investor sentiment risk; Crypto fear and greed index; Cryptocurrency pricing; Negative sentiment risk premium; Cross-sectional tests (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:46:y:2025:i:c:s2214635025000243

DOI: 10.1016/j.jbef.2025.101043

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