Asymmetric Impact of Bitcoin Sentiments on Sectoral Stock Returns

26 Pages Posted: 13 Jul 2021

See all articles by Ishfaque Ahmed Soomro

Ishfaque Ahmed Soomro

Sukkur IBA University

Suresh Kumar Oad Rajput

Sukkur IBA University

Nadia Anjum

Sukkur IBA University

Najma Ali Soomro

Sukkur IBA University, Students

Date Written: July 9, 2021

Abstract

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

Soomro, Ishfaque Ahmed and Oad Rajput, Suresh Kumar and Anjum, Nadia and Soomro, Najma Ali, Asymmetric Impact of Bitcoin Sentiments on Sectoral Stock Returns (July 9, 2021). Available at SSRN: https://ssrn.com/abstract=3883618 or http://dx.doi.org/10.2139/ssrn.3883618

Ishfaque Ahmed Soomro (Contact Author)

Sukkur IBA University ( email )

Sukkur, Sindh
Pakistan

Suresh Kumar Oad Rajput

Sukkur IBA University ( email )

SUKKUR IBA UNIVERSITY
SUKKUR, SINDH 65200
Pakistan
00923363322855 (Phone)
65200 (Fax)

Nadia Anjum

Sukkur IBA University ( email )

http://www.iba-suk.edu.pk/
Sukkur, Sindh 65200
Pakistan

Najma Ali Soomro

Sukkur IBA University, Students ( email )

Pakistan

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