Exploring the asymmetric effect of COVID-19 pandemic news on the cryptocurrency market: evidence from nonlinear autoregressive distributed lag approach and frequency domain causality
Ştefan Gherghina and
Liliana Nicoleta Simionescu ()
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Liliana Nicoleta Simionescu: Bucharest University of Economic Studies
Financial Innovation, 2023, vol. 9, issue 1, 1-58
Abstract This paper explores the asymmetric effect of COVID-19 pandemic news, as measured by the coronavirus indices (Panic, Hype, Fake News, Sentiment, Infodemic, and Media Coverage), on the cryptocurrency market. Using daily data from January 2020 to September 2021 and the exponential generalized autoregressive conditional heteroskedasticity model, the results revealed that both adverse and optimistic news had the same effect on Bitcoin returns, indicating fear of missing out behavior does not prevail. Furthermore, when the nonlinear autoregressive distributed lag model is estimated, both positive and negative shocks in pandemic indices promote Bitcoin’s daily changes; thus, Bitcoin is resistant to the SARS-CoV-2 pandemic crisis and may serve as a hedge during market turmoil. The analysis of frequency domain causality supports a unidirectional causality running from the Coronavirus Fake News Index and Sentiment Index to Bitcoin returns, whereas daily fluctuations in the Bitcoin price Granger affect the Coronavirus Panic Index and the Hype Index. These findings may have significant policy implications for investors and governments because they highlight the importance of news during turbulent times. The empirical results indicate that pandemic news could significantly influence Bitcoin’s price.
Keywords: COVID-19; Bitcoin; NARDL; EGARCH; Frequency domain causality (search for similar items in EconPapers)
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