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Pay Attention! A Country-Level Analysis of Investor Attention & Policy Uncertainty on Bitcoin

Zervas, Nicholas Eric LU and Kissel, Ari LU (2024) NEKN02 20241
Department of Economics
Abstract
This paper investigates the relationship between measures of policy uncertainty, investor
attention, and Bitcoin markets at a national level. To date, there are limited studies on
the region-specific impact of policy uncertainty and investor attention on Bitcoin, despite
evidence showing significant heterogeneities in the use, purpose, and acceptance of Bitcoin
across different countries. These heterogeneities may also lead to regional Bitcoin ‘premia’,
which we define as the price differences of Bitcoin between local markets and the US market.
Using multivariate regression in conjunction with panel and Quantile-on-Quantile (QQ)
regression analysis, we explore how Bitcoin is treated across different countries and under
varying... (More)
This paper investigates the relationship between measures of policy uncertainty, investor
attention, and Bitcoin markets at a national level. To date, there are limited studies on
the region-specific impact of policy uncertainty and investor attention on Bitcoin, despite
evidence showing significant heterogeneities in the use, purpose, and acceptance of Bitcoin
across different countries. These heterogeneities may also lead to regional Bitcoin ‘premia’,
which we define as the price differences of Bitcoin between local markets and the US market.
Using multivariate regression in conjunction with panel and Quantile-on-Quantile (QQ)
regression analysis, we explore how Bitcoin is treated across different countries and under
varying market conditions. Our analysis reveals that regional Bitcoin markets exhibit high
levels of speculation driven by investor attention, which we measure using Google Search
Volume (GSV), and that these markets also demonstrate significant inefficiencies evidenced
by pronounced momentum effects. Interestingly, we observe a negligible contemporaneous
relationship between policy uncertainty and Bitcoin markets. Moreover, we find that Bitcoin
premia are unaffected by local investor sentiment but are best accounted for by the appreciation
of local foreign exchange rates against the US dollar (USD). Our findings challenge
conventional financial theories and provide practical tools for investors and regulators aiming
to navigate or govern speculative Bitcoin markets. (Less)
Please use this url to cite or link to this publication:
author
Zervas, Nicholas Eric LU and Kissel, Ari LU
supervisor
organization
course
NEKN02 20241
year
type
H1 - Master's Degree (One Year)
subject
keywords
Policy Uncertainty, Investor Attention, Bitcoin Markets, Country Analysis, Bitcoin Premia
language
English
id
9163856
date added to LUP
2024-08-12 16:00:19
date last changed
2024-08-12 16:00:19
@misc{9163856,
  abstract     = {{This paper investigates the relationship between measures of policy uncertainty, investor
attention, and Bitcoin markets at a national level. To date, there are limited studies on
the region-specific impact of policy uncertainty and investor attention on Bitcoin, despite
evidence showing significant heterogeneities in the use, purpose, and acceptance of Bitcoin
across different countries. These heterogeneities may also lead to regional Bitcoin ‘premia’,
which we define as the price differences of Bitcoin between local markets and the US market.
Using multivariate regression in conjunction with panel and Quantile-on-Quantile (QQ)
regression analysis, we explore how Bitcoin is treated across different countries and under
varying market conditions. Our analysis reveals that regional Bitcoin markets exhibit high
levels of speculation driven by investor attention, which we measure using Google Search
Volume (GSV), and that these markets also demonstrate significant inefficiencies evidenced
by pronounced momentum effects. Interestingly, we observe a negligible contemporaneous
relationship between policy uncertainty and Bitcoin markets. Moreover, we find that Bitcoin
premia are unaffected by local investor sentiment but are best accounted for by the appreciation
of local foreign exchange rates against the US dollar (USD). Our findings challenge
conventional financial theories and provide practical tools for investors and regulators aiming
to navigate or govern speculative Bitcoin markets.}},
  author       = {{Zervas, Nicholas Eric and Kissel, Ari}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Pay Attention! A Country-Level Analysis of Investor Attention & Policy Uncertainty on Bitcoin}},
  year         = {{2024}},
}