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
Date Written: November 12, 2018
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
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