News sentiment and the cross-section of cryptocurrency returns

Tembo, Thokozile Mirriam, Ma, Tiejun, McGroarty, Frank and He, He (2024) News sentiment and the cross-section of cryptocurrency returns. 7th Cryptocurrency Research Conference (CRC2024), Zayed University, Dubai, United Arab Emirates. 23 - 24 Sep 2024.

Abstract

Cryptocurrency markets, characterized by high volatility and speculative dynamics, are significantly influenced by market sentiments derived from news. This study integrates news sentiment into a four-factor asset pricing model that includes market, size, momentum, and news sentiment factors to explain the cross-section of cryptocurrency returns. Building on existing literature, this research addresses key gaps by incorporating sentiment analysis into traditional asset pricing models.

The literature review reveals that while prior studies have examined the impact of macroeconomic news and investor sentiment on cryptocurrency prices, they often lack a comprehensive model that integrates these factors. This paper expands on the work of Rognone et al. (2020) and Sapkota (2022), who highlighted the effects of news on volatility, by including multiple cryptocurrencies and providing a structured pricing model. Yue et al. (2021) emphasized the asymmetric effects of news sentiment on liquidity, and this study further explores how these changes affect market returns within an asset pricing framework.

The four-factor model aims to provide a robust framework for understanding cryptocurrency returns, incorporating the critical role of news sentiment in shaping market dynamics. This study contributes to the theoretical understanding of cryptocurrency markets and offers practical implications for investors and policymakers navigating this volatile landscape.

This record has no associated files available for download.

Contributors

Author: Thokozile Mirriam Tembo

Author: Frank McGroarty

Download statistics