Asymmetric Impact of Bitcoin Sentiments on Sectoral Stock Returns
26 Pages Posted: 13 Jul 2021
Date Written: July 9, 2021
This study cross-checks the symmetric and asymmetric effects of investor’s optimistic and pessimistic sentiments of Bitcoin on 23 sectoral stock return indices (10 Islamic stock sectoral indices and one composite Islamic market index by Dow Jones Islamic market and 12 industrial indices by Kenneth R French). Results of Autoregressive Distributed Lag (ARDL) and Nonlinear ARDL models are supporting our conjecture that when investors’ are being optimistic (pessimistic) to Bitcoin they move part of their funds from stocks (Bitcoin) to Bitcoin (stocks). Second, we found asymmetric effects of both sentiment indices on the Islamic stock indices and conventional stock indices. Third, we found support for the decoupling hypothesis as Bitcoin sentiments are affecting conventional stock indices more than Islamic stock indices. Fourth, investors’ optimistic sentiments are robust than pessimistic sentiments explaining sectoral stock return indices. Fifth, insignificance of OBSI and PBSI in most of the sectoral stock indices are evidencing the hedging opportunity for Bitcoin investors.
Keywords: Bitcoin sentiments, sectoral returns, Islamic stocks, Asset allocation
JEL Classification: D84, G11, G41
Suggested Citation: Suggested Citation