Investor Sentiment and Initial Coin Offerings

The Journal of Alternative Investments, 22 (4), Spring 2019.

2 Pages Posted: 31 Oct 2018 Last revised: 6 Apr 2019

See all articles by Wolfgang Drobetz

Wolfgang Drobetz

Hamburg University

Paul P. Momtaz

University of California, Los Angeles (UCLA)

Henning Schröder

University of Hamburg

Date Written: November 12, 2018

Abstract

We examine to what extent the market for initial coin offerings (ICOs) is driven by investor sentiment. Our results based on a comprehensive set of sentiment and coin price data suggest that the ICO market is driven by crypto-related sentiment, but is almost unrelated to general capital market sentiment. Among the crypto-related sentiment, social media channels, rather than traditional news channels, are the main source of investor sentiment. We find that ICO firms exploit ’windows of opportunity’ and avoid periods of negative sentiment. Coins listed during periods with negative investor sentiment generate negative returns in the short run. Moreover, returns to investors on the first day of trading predict long-run returns up to sixth months.

Keywords: Initial coin offerings, ICOs, investor sentiment, market sentiment, market timing, window of opportunity

JEL Classification: G10, G24, G30, G32, K22, L26

Suggested Citation

Drobetz, Wolfgang and Momtaz, Paul P. and Schröder, Henning, Investor Sentiment and Initial Coin Offerings (November 12, 2018). The Journal of Alternative Investments, 22 (4), Spring 2019.. Available at SSRN: https://ssrn.com/abstract=3262980 or http://dx.doi.org/10.2139/ssrn.3262980

Wolfgang Drobetz

Hamburg University ( email )

Moorweidenstrasse 18
Hamburg, 20148
Germany

Paul P. Momtaz (Contact Author)

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

Henning Schröder

University of Hamburg ( email )

Moorweidenstraße 18
Hamburg, 20148
Germany
+49 (0)40 42838 6537 (Phone)

HOME PAGE: http://www.bwl.uni-hamburg.de/finance

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