The COVID-19 pandemic and Bitcoin: Perspective from investor attention
The response of the Bitcoin market to the novel coronavirus (COVID-19) pandemic is an example of how a global public health crisis can cause drastic market adjustments or even a market crash. Investor attention on the COVID-19 pandemic is likely to play an important role in this response. Focusing o...
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| Format: | Article |
| Language: | English |
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Frontiers Media S.A.
2023-04-01
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| Series: | Frontiers in Public Health |
| Subjects: | |
| Online Access: | https://www.frontiersin.org/articles/10.3389/fpubh.2023.1147838/full |
| _version_ | 1827968423430193152 |
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| author | Jieru Wan You Wu Panpan Zhu |
| author_facet | Jieru Wan You Wu Panpan Zhu |
| author_sort | Jieru Wan |
| collection | DOAJ |
| description | The response of the Bitcoin market to the novel coronavirus (COVID-19) pandemic is an example of how a global public health crisis can cause drastic market adjustments or even a market crash. Investor attention on the COVID-19 pandemic is likely to play an important role in this response. Focusing on the Bitcoin futures market, this paper aims to investigate whether pandemic attention can explain and forecast the returns and volatility of Bitcoin futures. Using the daily Google search volume index for the “coronavirus” keyword from January 2020 to February 2022 to represent pandemic attention, this paper implements the Granger causality test, Vector Autoregression (VAR) analysis, and several linear effects analyses. The findings suggest that pandemic attention is a granger cause of Bitcoin returns and volatility. It appears that an increase in pandemic attention results in lower returns and excessive volatility in the Bitcoin futures market, even after taking into account the interactive effects and the influence of controlling other financial markets. In addition, this paper carries out the out-of-sample forecasts and finds that the predictive models with pandemic attention do improve the out-of-sample forecast performance, which is enhanced in the prediction of Bitcoin returns while diminished in the prediction of Bitcoin volatility as the forecast horizon is extended. Finally, the predictive models including pandemic attention can generate significant economic benefits by constructing portfolios among Bitcoin futures and risk-free assets. All the results demonstrate that pandemic attention plays an important and non-negligible role in the Bitcoin futures market. This paper can provide enlightens for subsequent research on Bitcoin based on investor attention sparked by public emergencies. |
| first_indexed | 2024-04-09T18:22:31Z |
| format | Article |
| id | doaj.art-c1cf5e5609474c44ada15a88e3c281b9 |
| institution | Directory Open Access Journal |
| issn | 2296-2565 |
| language | English |
| last_indexed | 2024-04-09T18:22:31Z |
| publishDate | 2023-04-01 |
| publisher | Frontiers Media S.A. |
| record_format | Article |
| series | Frontiers in Public Health |
| spelling | doaj.art-c1cf5e5609474c44ada15a88e3c281b92023-04-12T05:54:01ZengFrontiers Media S.A.Frontiers in Public Health2296-25652023-04-011110.3389/fpubh.2023.11478381147838The COVID-19 pandemic and Bitcoin: Perspective from investor attentionJieru Wan0You Wu1Panpan Zhu2Nottingham University Business School, University of Nottingham, Nottingham, United KingdomSchool of Economics, Beijing Technology and Business University, Beijing, ChinaSchool of Economics, Beijing Technology and Business University, Beijing, ChinaThe response of the Bitcoin market to the novel coronavirus (COVID-19) pandemic is an example of how a global public health crisis can cause drastic market adjustments or even a market crash. Investor attention on the COVID-19 pandemic is likely to play an important role in this response. Focusing on the Bitcoin futures market, this paper aims to investigate whether pandemic attention can explain and forecast the returns and volatility of Bitcoin futures. Using the daily Google search volume index for the “coronavirus” keyword from January 2020 to February 2022 to represent pandemic attention, this paper implements the Granger causality test, Vector Autoregression (VAR) analysis, and several linear effects analyses. The findings suggest that pandemic attention is a granger cause of Bitcoin returns and volatility. It appears that an increase in pandemic attention results in lower returns and excessive volatility in the Bitcoin futures market, even after taking into account the interactive effects and the influence of controlling other financial markets. In addition, this paper carries out the out-of-sample forecasts and finds that the predictive models with pandemic attention do improve the out-of-sample forecast performance, which is enhanced in the prediction of Bitcoin returns while diminished in the prediction of Bitcoin volatility as the forecast horizon is extended. Finally, the predictive models including pandemic attention can generate significant economic benefits by constructing portfolios among Bitcoin futures and risk-free assets. All the results demonstrate that pandemic attention plays an important and non-negligible role in the Bitcoin futures market. This paper can provide enlightens for subsequent research on Bitcoin based on investor attention sparked by public emergencies.https://www.frontiersin.org/articles/10.3389/fpubh.2023.1147838/fullinvestor attentionBitcoinCOVID-19 pandemicVAR analysisforecast |
| spellingShingle | Jieru Wan You Wu Panpan Zhu The COVID-19 pandemic and Bitcoin: Perspective from investor attention Frontiers in Public Health investor attention Bitcoin COVID-19 pandemic VAR analysis forecast |
| title | The COVID-19 pandemic and Bitcoin: Perspective from investor attention |
| title_full | The COVID-19 pandemic and Bitcoin: Perspective from investor attention |
| title_fullStr | The COVID-19 pandemic and Bitcoin: Perspective from investor attention |
| title_full_unstemmed | The COVID-19 pandemic and Bitcoin: Perspective from investor attention |
| title_short | The COVID-19 pandemic and Bitcoin: Perspective from investor attention |
| title_sort | covid 19 pandemic and bitcoin perspective from investor attention |
| topic | investor attention Bitcoin COVID-19 pandemic VAR analysis forecast |
| url | https://www.frontiersin.org/articles/10.3389/fpubh.2023.1147838/full |
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