Volatility connectedness of major cryptocurrencies : the role of investor happiness

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dc.contributor.author Bouri, Elie
dc.contributor.author Gabauer, David
dc.contributor.author Gupta, Rangan
dc.contributor.author Tiwari, Aviral Kumar
dc.date.accessioned 2022-07-04T11:48:09Z
dc.date.available 2022-07-04T11:48:09Z
dc.date.issued 2021-06
dc.description.abstract In this paper, we first obtain a time-varying measure of volatility connectedness involving fifteen major cryptocurrencies based on a dynamic conditional correlation-generalized autoregressive conditional heteroscedasticity (DCC-GARCH) model, and then analyze the role of investor sentiment in explaining the movement of the connectedness metric within a quantile-on-quantile framework. Our findings show that lower quantiles of investor happiness, built on Twitter feed data as a proxy for investor sentiment, is positively associated with the entire conditional distribution of connectedness, but the opposite is observed at higher values of investor happiness. In addition, when we look at the effect of sentiment on the common market volatility, we are able to deduce that as investors become exceedingly unhappy, overall market volatility increases and this is associated with high market connectedness. The heightened volatility possibly due to higher trading, seems to suggest that cryptocurrencies are used for hedging when investor sentiment is weak, with evidence in favor of this behavior being relatively stronger than the possible speculative motive associated with happy investors, as low total connectedness is coupled with high common volatility. Our results tend to suggest that, relatively more diversification opportunities are available when investors are happy rather than when sentiment is weak. en_US
dc.description.department Economics en_US
dc.description.librarian hj2022 en_US
dc.description.uri http://www.elsevier.com/locate/jbef en_US
dc.identifier.citation Bouri, E., Gabauer, D., Gupta, R. &, Tiwari, A.K. 2021, 'Volatility connectedness of major cryptocurrencies : the role of investor happiness', Journal of Behavioral and Experimental Finance, vol. 30, art. 100463, pp. 1-11, doi : 10.1016/j.jbef.2021.100463. en_US
dc.identifier.issn 2214-6350 (online)
dc.identifier.other 10.1016/j.jbef.2021.100463
dc.identifier.uri https://repository.up.ac.za/handle/2263/86038
dc.language.iso en en_US
dc.publisher Elsevier en_US
dc.rights © 2021 Elsevier B.V. All rights reserved. Notice : this is the author’s version of a work that was submitted for publication in Journal of Behavioral and Experimental Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms are not reflected in this document. A definitive version was subsequently published in Journal of Behavioral and Experimental Finance, vol. 30, art. 100463, pp. 1-11, 2021. doi : 10.1016/j.jbef.2021.100463. en_US
dc.subject Cryptocurrency market en_US
dc.subject Dynamic conditional correlation-generalized autoregressive conditional heteroscedasticity (DCC-GARCH) en_US
dc.subject Volatility connectedness en_US
dc.subject Investor happiness en_US
dc.subject Quantile-on-quantile regression en_US
dc.title Volatility connectedness of major cryptocurrencies : the role of investor happiness en_US
dc.type Preprint Article en_US


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