Nonlinear nexus between cryptocurrency returns and COVID–19 news sentiment

Banerjee, Ameet Kumar; Akhtaruzzaman, Md; Dionisio, Andreia; Almeida, Dora Maria; Sensoy, Ahmet

doi:10.2139/ssrn.3923559

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Nonlinear nexus between cryptocurrency returns and COVID–19 news sentiment

37 Pages Posted: 15 Sep 2021

See all articles by Ameet Kumar Banerjee

Ameet Kumar Banerjee

Banasthali University - Faculty of Management Studies

Ahmet Sensoy

Borsa Istanbul

Date Written: August 1, 2021

Abstract

This paper examines how different categories of COVID–19 news sentiment differentially impact the behavior of cryptocurrency returns. A nonlinear technique of transfer entropy is applied to investigate the relationship between the top 30 cryptocurrencies by market capitalization and COVID–19 news sentiment to capture cryptocurrency return and volatility dynamics. Results show that COVID–19 news sentiment influences cryptocurrency returns. The nexus is unidirectional from news sentiment to cryptocurrency returns, in contrast to past findings. These results have practical implications for policymakers and market participants in understanding cryptocurrency market dynamics under stressful market conditions.

Keywords: COVID–19 news sentiment, pandemic, cryptocurrencies, transfer entropy

JEL Classification: G11, G14, G15, G23, G40

Suggested Citation: Suggested Citation

Banerjee, Ameet Kumar and Akhtaruzzaman, Md and Dionisio, Andreia and Almeida, Dora Maria and Sensoy, Ahmet, Nonlinear nexus between cryptocurrency returns and COVID–19 news sentiment (August 1, 2021). Available at SSRN: https://ssrn.com/abstract=3923559 or http://dx.doi.org/10.2139/ssrn.3923559