Cryptocurrency price volatility and investor attention

Mohamed Al Guindy

International Review of Economics & Finance, 2021, vol. 76, issue C, 556-570

Abstract: This study examines the relationship between the price volatility of cryptocurrencies and investor attention. Using a large dataset of approximately 25 million tweets about 23 of the largest cryptocurrencies, I show that investor attention, as proxied by the number of tweets, retweets, and favorites, corresponds to greater cryptocurrency price volatility. I use a Vector Autoregression (VAR) framework to show that investor attention predicts future price volatility. Additionally, days on which investors are “distracted” because of attention-grabbing events correspond to lower price volatility in cryptocurrency markets. The results suggest that increased investor attention to cryptocurrencies has the undesirable effect of increasing price volatility.

Keywords: Cryptocurrencies; Bitcoin; Investor attention; Social media (search for similar items in EconPapers)
JEL-codes: G10 G12 G40 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:76:y:2021:i:c:p:556-570

DOI: 10.1016/j.iref.2021.06.007

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