Sentiment spillover and price dynamics: Information flow in the cryptocurrency and stock market

Rocco Caferra

Physica A: Statistical Mechanics and its Applications, 2022, vol. 593, issue C

Abstract: This study examines the sentiment–returns relationship in both stock (S&P500) and cryptocurrency (Bitcoin) markets. An explorative wavelet analysis evidences period of episodic interconnectedness across different data frequencies. Therefore, Transfer Entropy (ET) measures remark the relative statistical significance, frequently outperforming traditional (VAR) estimates. In particular, ET methods successfully identify the mediating role of sentiments in connecting the two different markets. Hence, it is discussed how the potential cryptocurrencies indirect linkage with real economy moves through market sentiments.

Keywords: Cryptocurrencies; Information diffusion; Sentiment; Financial market (search for similar items in EconPapers)
JEL-codes: C58 G15 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:593:y:2022:i:c:s0378437122000747

DOI: 10.1016/j.physa.2022.126983

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