IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v54y2020ics0275531920304992.html
   My bibliography  Save this article

Attention allocation and international stock return comovement: Evidence from the Bitcoin market

Author

Listed:
  • Hu, Yitong
  • Li, Xiao
  • Shen, Dehua

Abstract

We employ extreme Bitcoin returns as exogenous shock events to investigate the impact of investor attention allocation on worldwide stock return comovement. We find that (1) these shock events decrease worldwide stock return comovement, (2) there is an asymmetric effect in which a crash shock event has a greater impact on return comovement than a jump shock event, and (3) the impact of these shock events on equity comovement is more pronounced in emerging markets. Our results suggest that identifying extreme Bitcoin returns will benefit portfolio construction. Our results may be of considerable interest to investors, as well as to academics interested in portfolio diversification, asset comovement, and cryptocurrencies.

Suggested Citation

  • Hu, Yitong & Li, Xiao & Shen, Dehua, 2020. "Attention allocation and international stock return comovement: Evidence from the Bitcoin market," Research in International Business and Finance, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:riibaf:v:54:y:2020:i:c:s0275531920304992
    DOI: 10.1016/j.ribaf.2020.101286
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0275531920304992
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ribaf.2020.101286?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. Chang, Eric C. & Cheng, Joseph W. & Khorana, Ajay, 2000. "An examination of herd behavior in equity markets: An international perspective," Journal of Banking & Finance, Elsevier, vol. 24(10), pages 1651-1679, October.
    2. Yuan, Yu, 2015. "Market-wide attention, trading, and stock returns," Journal of Financial Economics, Elsevier, vol. 116(3), pages 548-564.
    3. Mensi, Walid & Ur Rehman, Mobeen & Maitra, Debasish & Hamed Al-Yahyaee, Khamis & Sensoy, Ahmet, 2020. "Does bitcoin co-move and share risk with Sukuk and world and regional Islamic stock markets? Evidence using a time-frequency approach," Research in International Business and Finance, Elsevier, vol. 53(C).
    4. Malcolm Baker & Jeffrey Wurgler, 2006. "Investor Sentiment and the Cross‐Section of Stock Returns," Journal of Finance, American Finance Association, vol. 61(4), pages 1645-1680, August.
    5. Urquhart, Andrew, 2018. "What causes the attention of Bitcoin?," Economics Letters, Elsevier, vol. 166(C), pages 40-44.
    6. Claudio Morana, 2008. "International stock markets comovements: the role of economic and financial integration," Empirical Economics, Springer, vol. 35(2), pages 333-359, September.
    7. Elie Bouri & Mahamitra Das & Rangan Gupta & David Roubaud, 2018. "Spillovers between Bitcoin and other assets during bear and bull markets," Applied Economics, Taylor & Francis Journals, vol. 50(55), pages 5935-5949, November.
    8. Chaim, Pedro & Laurini, Márcio P., 2018. "Volatility and return jumps in bitcoin," Economics Letters, Elsevier, vol. 173(C), pages 158-163.
    9. da Cunha, C.R. & da Silva, R., 2020. "Relevant stylized facts about bitcoin: Fluctuations, first return probability, and natural phenomena," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 550(C).
    10. Peltomäki, Jarkko & Graham, Michael & Hasselgren, Anton, 2018. "Investor attention to market categories and market volatility: The case of emerging markets," Research in International Business and Finance, Elsevier, vol. 44(C), pages 532-546.
    11. Salisu, Afees A. & Isah, Kazeem & Akanni, Lateef O., 2019. "Improving the predictability of stock returns with Bitcoin prices," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 857-867.
    12. Peng, Lin & Xiong, Wei, 2006. "Investor attention, overconfidence and category learning," Journal of Financial Economics, Elsevier, vol. 80(3), pages 563-602, June.
    13. Matkovskyy, Roman & Jalan, Akanksha, 2019. "From financial markets to Bitcoin markets: A fresh look at the contagion effect," Finance Research Letters, Elsevier, vol. 31(C), pages 93-97.
    14. Kurka, Josef, 2019. "Do cryptocurrencies and traditional asset classes influence each other?," Finance Research Letters, Elsevier, vol. 31(C), pages 38-46.
    15. Xiaohui Gao & Tse-Chun Lin, 2015. "Do Individual Investors Treat Trading as a Fun and Exciting Gambling Activity? Evidence from Repeated Natural Experiments," Review of Financial Studies, Society for Financial Studies, vol. 28(7), pages 2128-2166.
    16. Akhtar, Shumi & Faff, Robert & Oliver, Barry & Subrahmanyam, Avanidhar, 2013. "Reprint of: Stock salience and the asymmetric market effect of consumer sentiment news," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4488-4500.
    17. Schmeling, Maik, 2009. "Investor sentiment and stock returns: Some international evidence," Journal of Empirical Finance, Elsevier, vol. 16(3), pages 394-408, June.
    18. Inaba, Kei-Ichiro, 2020. "Information-driven stock return comovements across countries," Research in International Business and Finance, Elsevier, vol. 51(C).
    19. Longin, Francois & Solnik, Bruno, 1995. "Is the correlation in international equity returns constant: 1960-1990?," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 3-26, February.
    20. Goodell, John W. & Goutte, Stephane, 2021. "Co-movement of COVID-19 and Bitcoin: Evidence from wavelet coherence analysis," Finance Research Letters, Elsevier, vol. 38(C).
    21. Brad M. Barber & Terrance Odean, 2008. "All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors," Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 785-818, April.
    22. Huang, Shiyang & Huang, Yulin & Lin, Tse-Chun, 2019. "Attention allocation and return co-movement: Evidence from repeated natural experiments," Journal of Financial Economics, Elsevier, vol. 132(2), pages 369-383.
    23. Berben, Robert-Paul & Jansen, W. Jos, 2005. "Comovement in international equity markets: A sectoral view," Journal of International Money and Finance, Elsevier, vol. 24(5), pages 832-857, September.
    24. Alex Edmans & Diego García & Øyvind Norli, 2007. "Sports Sentiment and Stock Returns," Journal of Finance, American Finance Association, vol. 62(4), pages 1967-1998, August.
    25. Gronwald, Marc, 2019. "Is Bitcoin a Commodity? On price jumps, demand shocks, and certainty of supply," Journal of International Money and Finance, Elsevier, vol. 97(C), pages 86-92.
    26. Kim, Jeong-Bon & Zhang, Hao & Li, Liuchuang & Tian, Gaoliang, 2014. "Press freedom, externally-generated transparency, and stock price informativeness: International evidence," Journal of Banking & Finance, Elsevier, vol. 46(C), pages 299-310.
    27. Rangvid, Jesper, 2001. "Increasing convergence among European stock markets?: A recursive common stochastic trends analysis," Economics Letters, Elsevier, vol. 71(3), pages 383-389, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Meng, Yongqiang & Shen, Dehua & Xiong, Xiong, 2023. "When stock price crash risk meets fundamentals," Research in International Business and Finance, Elsevier, vol. 65(C).
    2. Dehua Shen & Wei Zhang, 2021. "Stay-at-Home Stocks Versus Go-Outside Stocks: The Impacts of COVID-19 on the Chinese Stock Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(2), pages 305-318, June.
    3. Zhaobo Zhu & Wenjie Ding & Yi Jin & Dehua Shen, 2023. "Dissecting the Idiosyncratic Volatility Puzzle: A Fundamental Analysis Approach," Post-Print hal-04194180, HAL.
    4. Jiang, Shangrong & Li, Yuze & Lu, Quanying & Wang, Shouyang & Wei, Yunjie, 2022. "Volatility communicator or receiver? Investigating volatility spillover mechanisms among Bitcoin and other financial markets," Research in International Business and Finance, Elsevier, vol. 59(C).
    5. Wei Zhang & Kai Yan & Dehua Shen, 2021. "Can the Baidu Index predict realized volatility in the Chinese stock market?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-31, December.
    6. Kyriazis, Nikolaos & Papadamou, Stephanos & Tzeremes, Panayiotis & Corbet, Shaen, 2023. "Can cryptocurrencies provide a viable hedging mechanism for benchmark index investors?," Research in International Business and Finance, Elsevier, vol. 64(C).
    7. Guo, Xiaochun & Lu, Fengbin & Wei, Yunjie, 2021. "Capture the contagion network of bitcoin – Evidence from pre and mid COVID-19," Research in International Business and Finance, Elsevier, vol. 58(C).
    8. Xu, Kewei & Xiong, Xiong & Li, Xiao, 2021. "The maturity effect of stock index futures: Speculation or carry arbitrage?," Research in International Business and Finance, Elsevier, vol. 58(C).
    9. Almeida, José & Gonçalves, Tiago Cruz, 2023. "A systematic literature review of investor behavior in the cryptocurrency markets," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).

    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. Ehrmann, Michael & Jansen, David-Jan, 2022. "Stock return comovement when investors are distracted: More, and more homogeneous," Journal of International Money and Finance, Elsevier, vol. 129(C).
    2. Ahmed, Walid M.A., 2021. "How do Islamic equity markets respond to good and bad volatility of cryptocurrencies? The case of Bitcoin," Pacific-Basin Finance Journal, Elsevier, vol. 70(C).
    3. Guomei Tang & Xueyong Zhang, 2021. "Media attention to locations and the cross‐section of stock returns," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2301-2336, April.
    4. Ozdamar, Melisa & Sensoy, Ahmet & Akdeniz, Levent, 2022. "Retail vs institutional investor attention in the cryptocurrency market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    5. Li, Yue & Goodell, John W. & Shen, Dehua, 2021. "Comparing search-engine and social-media attentions in finance research: Evidence from cryptocurrencies," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 723-746.
    6. Aissia, Dorsaf Ben, 2016. "Home and foreign investor sentiment and the stock returns," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 71-77.
    7. Hung, Weifeng & Lin, Ching-Ting & Yang, J. Jimmy, 2022. "Aggregate 52-week high, limited attention, and time-varying momentum profits," Journal of Banking & Finance, Elsevier, vol. 141(C).
    8. David Hirshleife, 2015. "Behavioral Finance," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 133-159, December.
    9. Cai, Haidong & Jiang, Ying & Liu, Xiaoquan, 2022. "Investor attention, aggregate limit-hits, and stock returns," International Review of Financial Analysis, Elsevier, vol. 83(C).
    10. Goodell, John W. & Kumar, Satish & Li, Xiao & Pattnaik, Debidutta & Sharma, Anuj, 2022. "Foundations and research clusters in investor attention: Evidence from bibliometric and topic modelling analysis," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 511-529.
    11. Huang, Shiyang & Huang, Yulin & Lin, Tse-Chun, 2019. "Attention allocation and return co-movement: Evidence from repeated natural experiments," Journal of Financial Economics, Elsevier, vol. 132(2), pages 369-383.
    12. Wenjie Ding & Khelifa Mazouz & Qingwei Wang, 2019. "Investor sentiment and the cross-section of stock returns: new theory and evidence," Review of Quantitative Finance and Accounting, Springer, vol. 53(2), pages 493-525, August.
    13. Wang, Wenzhao & Duxbury, Darren, 2021. "Institutional investor sentiment and the mean-variance relationship: Global evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 415-441.
    14. Cai, Wenwu & Lu, Jing, 2019. "Investors’ financial attention frequency and trading activity," Pacific-Basin Finance Journal, Elsevier, vol. 58(C).
    15. Li, Xiao & Shen, Dehua & Xue, Mei & Zhang, Wei, 2017. "Daily happiness and stock returns: The case of Chinese company listed in the United States," Economic Modelling, Elsevier, vol. 64(C), pages 496-501.
    16. Que, Jiangjing & Zhang, Xueyong, 2021. "Money chasing hot industries? Investor attention and valuation of venture capital backed firms," Journal of Corporate Finance, Elsevier, vol. 68(C).
    17. Goodell, John W. & Goutte, Stephane, 2021. "Diversifying equity with cryptocurrencies during COVID-19," International Review of Financial Analysis, Elsevier, vol. 76(C).
    18. Cheng, Feiyang & Chiao, Chaoshin & Wang, Chunfeng & Fang, Zhenming & Yao, Shouyu, 2021. "Does retail investor attention improve stock liquidity? A dynamic perspective," Economic Modelling, Elsevier, vol. 94(C), pages 170-183.
    19. Gang Chu & John W. Goodell & Dehua Shen & Yongjie Zhang, 2022. "Machine learning to establish proxies for investor attention: evidence of improved stock-return prediction," Annals of Operations Research, Springer, vol. 318(1), pages 103-128, November.
    20. Li, Fengfei & Lin, Chen & Lin, Tse-Chun, 2021. "Salient anchor and analyst recommendation downgrade," Journal of Corporate Finance, Elsevier, vol. 69(C).

    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:riibaf:v:54:y:2020:i:c:s0275531920304992. 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/ribaf .

    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.