Informative Effects of Expert Sentiment on the Return Predictability of Cryptocurrency

Abstract

Experts’ opinions are widely considered for investment decisions. We collect textual information from cryptocurrency experts, study the dynamics in their discussion topics and their sentiment in relation to market movements. Based on the analysis we test various hypothesis which span if the experts tweets have informative value (accepted), their discussion topics predict the market in the short (mostly accepted) and long run (rejected) as well as if their sentiment carries short (rejected) and long run (rejected) informative values. Lastly, we test if their individual and consensus sentiment (by profession) is indifferent from each other (both accepted ). This study suggests that there is no informative value from expert sentiment, though for discussion topics it depends on the market situation and prediction horizon. Surprisingly there is no relation to the profession of the expert.

Keywords: Cryptocurrency experts, sentiment analysis, topic modeling, sentiment based price discovery

JEL Classification: C55, C58, C60, G10, G12, G17