Twitter-Based uncertainty and cryptocurrency returns

[Display omitted] •We explore the impact of Twitter Uncertainty Measures (TMU & TEU) on four leading cryptocurrencies.•OLS, GARCH, Quantile and Causality in Quantiles Techniques are used to identify the Twitter-Cryptocurrencies relationship.•OLS and GARCH are inappropriate to explain contemporan...

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Bibliographic Details
Published in:Research in international business and finance 2022-01, Vol.59, p.101546, Article 101546
Main Authors: Aharon, David Y., Demir, Ender, Lau, Chi Keung Marco, Zaremba, Adam
Format: Article
Language:English
Subjects:
Bitcoin
Copula
Cryptocurrency
Directional test
Granger-causality
Quantile-in-quantile
Twitter
Uncertainty
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Summary:[Display omitted] •We explore the impact of Twitter Uncertainty Measures (TMU & TEU) on four leading cryptocurrencies.•OLS, GARCH, Quantile and Causality in Quantiles Techniques are used to identify the Twitter-Cryptocurrencies relationship.•OLS and GARCH are inappropriate to explain contemporaneous or lagged relationship.•Quantile regressions hint on significant effects in the upper (Bitcoin) and lower (Ethereum) parts of the distribution.•TMU and TEU Granger-cause fluctuations in cryptocurrencies in most parts of the distribution. We explore the relationship between two novel Twitter-based measures of economic and market uncertainty and the performance of four major cryptocurrencies. Using a battery of methods—quantile regressions, Granger-causality in distributions using copula functions, and directional predictability tests—we examine the behavior of Bitcoin, Ethereum, Bitcoin Cash, and Ripple. Our findings demonstrate a strong causal link between the uncertainty expressed in social media and cryptocurrency returns. The effect is particularly evident for Bitcoin and in the tails of return distributions. Our results cast new light on the importance of cryptocurrencies as an alternative asset class in the wake of global uncertainty.
ISSN:0275-5319
1878-3384
DOI:10.1016/j.ribaf.2021.101546