IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v51y2023ics1544612322006341.html
   My bibliography  Save this article

Visceral emotions and Bitcoin trading

Author

Listed:
  • Ahn, Yongkil
  • Kim, Dongyeon

Abstract

Using a new emotion-mining technique, we quantify visceral emotions among Bitcoin investors and investigate whether an empirical connection exists between micro-level visceral emotions and macro-level price dynamics in the cryptocurrency market. We find that cryptocurrency market investors carry visceral emotions. Bitcoin's intraday volatility and trading volume are associated with visceral emotions. This association is more salient for negative emotions. This form of emotional trading can cause a more behavioral group of investors to perform poorly in the cryptocurrency market.

Suggested Citation

  • Ahn, Yongkil & Kim, Dongyeon, 2023. "Visceral emotions and Bitcoin trading," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322006341
    DOI: 10.1016/j.frl.2022.103458
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612322006341
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2022.103458?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yongkil Ahn & Dongyeon Kim, 2020. "Sentiment disagreement and bitcoin price fluctuations: a psycholinguistic approach," Applied Economics Letters, Taylor & Francis Journals, vol. 27(5), pages 412-416, March.
    2. David Hirshleifer & Tyler Shumway, 2003. "Good Day Sunshine: Stock Returns and the Weather," Journal of Finance, American Finance Association, vol. 58(3), pages 1009-1032, June.
    3. Sapkota, Niranjan, 2022. "News-based sentiment and bitcoin volatility," International Review of Financial Analysis, Elsevier, vol. 82(C).
    4. Demir, Ender & Gozgor, Giray & Lau, Chi Keung Marco & Vigne, Samuel A., 2018. "Does economic policy uncertainty predict the Bitcoin returns? An empirical investigation," Finance Research Letters, Elsevier, vol. 26(C), pages 145-149.
    5. Ahn, Yongkil & Kim, Dongyeon, 2021. "Emotional trading in the cryptocurrency market," Finance Research Letters, Elsevier, vol. 42(C).
    6. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-824, December.
    7. Grobys, Klaus & Sapkota, Niranjan, 2019. "Cryptocurrencies and momentum," Economics Letters, Elsevier, vol. 180(C), pages 6-10.
    8. Derbaix, Christian & Vanhamme, Joelle, 2003. "Inducing word-of-mouth by eliciting surprise - a pilot investigation," Journal of Economic Psychology, Elsevier, vol. 24(1), pages 99-116, February.
    9. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    10. Jiang, Yonghong & Nie, He & Ruan, Weihua, 2018. "Time-varying long-term memory in Bitcoin market," Finance Research Letters, Elsevier, vol. 25(C), pages 280-284.
    11. Daniel, Kent & Hirshleifer, David & Teoh, Siew Hong, 2002. "Investor psychology in capital markets: evidence and policy implications," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 139-209, January.
    12. Mark J. Kamstra & Lisa A. Kramer & Maurice D. Levi, 2003. "Winter Blues: A SAD Stock Market Cycle," American Economic Review, American Economic Association, vol. 93(1), pages 324-343, March.
    13. John Griffith & Mohammad Najand & Jiancheng Shen, 2020. "Emotions in the Stock Market," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 21(1), pages 42-56, January.
    14. Bourghelle, David & Jawadi, Fredj & Rozin, Philippe, 2022. "Do collective emotions drive bitcoin volatility? A triple regime-switching vector approach," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 294-306.
    15. Zhang, Wei & Li, Yi, 2020. "Is idiosyncratic volatility priced in cryptocurrency markets?," Research in International Business and Finance, Elsevier, vol. 54(C).
    16. Gul, Faruk, 1991. "A Theory of Disappointment Aversion," Econometrica, Econometric Society, vol. 59(3), pages 667-686, May.
    17. Long, Huaigang & Zaremba, Adam & Demir, Ender & Szczygielski, Jan Jakub & Vasenin, Mikhail, 2020. "Seasonality in the Cross-Section of Cryptocurrency Returns," Finance Research Letters, Elsevier, vol. 35(C).
    18. George Loewenstein, 2000. "Emotions in Economic Theory and Economic Behavior," American Economic Review, American Economic Association, vol. 90(2), pages 426-432, May.
    19. Terrance Odean, 1999. "Do Investors Trade Too Much?," American Economic Review, American Economic Association, vol. 89(5), pages 1279-1298, December.
    20. Yi Li & Wei Zhang & Xiong Xiong & Pengfei Wang, 2020. "Does size matter in the cryptocurrency market?," Applied Economics Letters, Taylor & Francis Journals, vol. 27(14), pages 1141-1149, July.
    21. Tim Loughran & Bill Mcdonald, 2011. "When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10‐Ks," Journal of Finance, American Finance Association, vol. 66(1), pages 35-65, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ahn, Yongkil & Kim, Dongyeon, 2021. "Emotional trading in the cryptocurrency market," Finance Research Letters, Elsevier, vol. 42(C).
    2. Ahn, Yongkil, 2022. "Asymmetric tail dependence in cryptocurrency markets: A Model-free approach," Finance Research Letters, Elsevier, vol. 47(PB).
    3. Shu, Hui-Chu, 2010. "Investor mood and financial markets," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 267-282, November.
    4. Liebi, Luca J., 2022. "Is there a value premium in cryptoasset markets?," Economic Modelling, Elsevier, vol. 109(C).
    5. Brian M. Lucey & Michael Dowling, 2005. "The Role of Feelings in Investor Decision‐Making," Journal of Economic Surveys, Wiley Blackwell, vol. 19(2), pages 211-237, April.
    6. Aharon, David Y. & Demir, Ender & Lau, Chi Keung Marco & Zaremba, Adam, 2022. "Twitter-Based uncertainty and cryptocurrency returns," Research in International Business and Finance, Elsevier, vol. 59(C).
    7. Stracca, Livio, 2004. "Behavioral finance and asset prices: Where do we stand?," Journal of Economic Psychology, Elsevier, vol. 25(3), pages 373-405, June.
    8. Andrew W. Lo & Dmitry V. Repin & Brett N. Steenbarger, 2005. "Fear and Greed in Financial Markets: A Clinical Study of Day-Traders," American Economic Review, American Economic Association, vol. 95(2), pages 352-359, May.
    9. Michaël Lainé, 2014. "Vers une alternative au paradigme de la rationalité ? Victoires et déboires du programme spinoziste en économie," Post-Print hal-01335618, HAL.
    10. Milan Fičura, 2023. "Impact of size and volume on cryptocurrency momentum and reversal," FFA Working Papers 5.003, Prague University of Economics and Business, revised 05 Apr 2023.
    11. Christopher Boyce & Mikolaj Czajkowski & Nick Hanley & Charles Noussair & Michael Townsend & Steve Tucker, 2015. "The effects of emotions on preferences and choices for public goods," Discussion Papers in Environment and Development Economics 2015-08, University of St. Andrews, School of Geography and Sustainable Development.
    12. Gennaro Bernile & Vineet Bhagwat & Ambrus Kecskés & Phuong‐Anh Nguyen, 2021. "Are the risk attitudes of professional investors affected by personal catastrophic experiences?," Financial Management, Financial Management Association International, vol. 50(2), pages 455-486, June.
    13. Bennett, Donyetta & Mekelburg, Erik & Williams, T.H., 2023. "BeFi meets DeFi: A behavioral finance approach to decentralized finance asset pricing," Research in International Business and Finance, Elsevier, vol. 65(C).
    14. Michaël Lainé, 2014. "Vers une alternative au paradigme de la rationalité ? Victoires et déboires du programme spinoziste en économie," Post-Print hal-04264939, HAL.
    15. Kelly, Patrick J. & Meschke, Felix, 2010. "Sentiment and stock returns: The SAD anomaly revisited," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1308-1326, June.
    16. Dong, Rui & Fisman, Raymond & Wang, Yongxiang & Xu, Nianhang, 2021. "Air pollution, affect, and forecasting bias: Evidence from Chinese financial analysts," Journal of Financial Economics, Elsevier, vol. 139(3), pages 971-984.
    17. David Hirshleifer, 2001. "Investor Psychology and Asset Pricing," Journal of Finance, American Finance Association, vol. 56(4), pages 1533-1597, August.
    18. Benjamin Hermalin & Alice Isen, 2008. "A model of the effect of affect on economic decision making," Quantitative Marketing and Economics (QME), Springer, vol. 6(1), pages 17-40, March.
    19. Beckmann, Joscha & Geldner, Teo & Wüstenfeld, Jan, 2024. "The relevance of media sentiment for small and large scale bitcoin investors," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 92(C).
    20. Dobrynskaya, Victoria, 2024. "Is downside risk priced in cryptocurrency market?," International Review of Financial Analysis, Elsevier, vol. 91(C).

    More about this item

    Keywords

    Visceral emotions; Bitcoin; Return; Volatility; Trading volume;
    All these keywords.

    JEL classification:

    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322006341. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.