Frequency domain causality and quantile connectedness between investor sentiment and cryptocurrency returns

Huiming Zhu, Zhanming Xing, Yinghua Ren, Yiwen Chen and Liya Hau

International Review of Economics & Finance, 2023, vol. 88, issue C, 1035-1051

Abstract: This study investigates the frequency-domain causality and quantile connectedness between online investors’ fear sentiment and cryptocurrency returns. We propose cross-quantile coherency and networks to examine the frequency-domain nonlinear interdependence. First, we find that investor fear sentiment and cryptocurrency returns exhibit bidirectional causality. Second, fear exhibits an asymmetric connectedness with cryptocurrency returns across quantiles and frequencies. Third, short-term cross-quantile connectedness is found to be more significant than long-term connectedness. These findings can help investors and policymakers make decisions regarding diversified hedging and controlling for potential risks.

Keywords: Investor sentiment; Fears; Cryptocurrency returns; Frequency domain causality; Cross-quantile coherency; Cross-quantile network (search for similar items in EconPapers)
JEL-codes: C32 C58 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:88:y:2023:i:c:p:1035-1051

DOI: 10.1016/j.iref.2023.07.038

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