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Listening to the Market: Music sentiment and cryptocurrency returns

Author

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  • Hadhri, Sinda
  • Younus, Mehak
  • Naeem, Muhammad Abubakr
  • Yarovaya, Larisa

Abstract

This paper investigates how investor sentiment, captured through a novel Spotify-based mood metric, influences the cross-sectional pricing of cryptocurrencies. Drawing on behavioral finance and psychological theories, we hypothesize that emotional states reflected in musical choices influence cryptocurrency returns. Using weekly data from 2,551 cryptocurrencies over five years, we find that sensitivity to music sentiment significantly predicts future returns. Our results reveal a negative relationship between music sentiment beta and near-term returns, with multivariate regressions confirming its explanatory power beyond traditional risk factors. We also uncover nonlinear and time-varying effects, consistent with sentiment-driven mispricing and investor attention cycles. This study offers a global sentiment measure, contributing to the understanding of mood-driven dynamics in speculative markets and informing trading strategies, policy, and research.

Suggested Citation

  • Hadhri, Sinda & Younus, Mehak & Naeem, Muhammad Abubakr & Yarovaya, Larisa, 2025. "Listening to the Market: Music sentiment and cryptocurrency returns," Journal of International Money and Finance, Elsevier, vol. 157(C).
    • Handle: RePEc:eee:jimfin:v:157:y:2025:i:c:s0261560625001299
    DOI: 10.1016/j.jimonfin.2025.103394
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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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