Cryptocurrencies are not immune to coronavirus: Evidence from investor fear

This paper examines the effects of fear of coronavirus on returns and volatility of five major cryptocurrencies during the COVID-19 outbreak. Adopting Google search volume on a comprehensive list of coronavirus-related terms to construct a gauge of fear, we show that daily innovations in coronavirus...

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Bibliographic Details
Published in:International review of economics & finance 2023-11, Vol.88, p.1444-1463
Main Authors: Hoang, Lai T., Baur, Dirk G.
Format: Article
Language:English
Subjects:
Bitcoin
Coronavirus
Cryptocurrencies
Google Trends
Pandemic
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Summary:This paper examines the effects of fear of coronavirus on returns and volatility of five major cryptocurrencies during the COVID-19 outbreak. Adopting Google search volume on a comprehensive list of coronavirus-related terms to construct a gauge of fear, we show that daily innovations in coronavirus fear are associated with lower prices and higher volatility. The effects are driven by the extreme events and associated googling in March 2020. Out-of-sample tests further show a significant contribution of fear to forecasting next-day returns and volatility. The results indicate that (i) cryptocurrencies (particularly bitcoin) are not a safe haven for investors against the COVID-19 pandemic, and (ii) Google searches contain important information to explain cryptocurrency market movements during times of crisis.
ISSN:1059-0560
1873-8036
DOI:10.1016/j.iref.2023.06.018