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Asian Review of Financial Research Vol.35 No.3 pp.35-66
Investor Sentiment and Mean-variance Relationship in Cryptocurrency Market
Jun Sik Kim Associate Professor, Division of International Trade, Incheon National University
Key Words : Crypto Fear & Greed Index,Cryptocurrency market,Investor sentiment,Mean-variance relationship,Risk-return tradeoff


This study aims to examine the influence of investor sentiment in the cryptocurrency market on the mean-variance relationship of Bitcoin. We find that Bitcoin expected excess return is positively related to conditional variance of Bitcoin return daily during the period of Extreme Fear but unrelated to conditional variance during the periods of Fear, Neutral, Greed, and Extreme Greed. Our findings are consistent with a distortion of a positive mean-variance tradeoff by investor sentiment. We also find that a negative relation between returns and contemporaneous innovations of conditional variance is only significant in the period of Extreme Fear. Moreover, the findings are robust, even after controlling for the impact of global factors determining Bitcoin price, and in Ethereum market, beyond Bitcoin market.
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