Investor attention and market activity: evidence from green cryptocurrencies

Abstract

Purpose This paper aims to investigate the relationship between investor attention and market activity (return, volatility and volume) using a sample of 14 clean energy cryptocurrencies (hereafter green cryptocurrency), namely, Chia, Cardano, Stellar, Tron, Ripple, Nano, IOTA, EOS, Bitcoin Green, Alogrand, Hedara, Polkadot, FLOW and Tezos.

Design/methodology/approach This paper use 26040 crypto-day observations and a range of econometric techniques, including Dynamic Granger causality, Panel vector autoregression (VAR), Impulse response function and the decomposition of forecast error variance.

Findings Based on 26040 crypto-day observations, this paper finds a bidirectional Granger causal relationship between investor attention and all measures of market activity, namely, return, absolute volatility, squared volatility and volume. The panel VAR and impulse response function demonstrate that market activity in the green crypto ecosystem, especially volatility and volume, is considerably responsive to changes in investor attention proxied by Google search volume (hereafter Google search volume (GSV)). The findings also demonstrate a significant asymmetric effect of return and volume on investor attention since past negative shocks “or bad news” in return and volume are more likely to grab the investor’s attention. All in all, our study emphasizes the crucial role of investor attention in the green crypto ecosystem.

Originality/value (i) The research is the first to shed light on investor attention in the green cryptocurrency market. (ii) The paper uses a wide range of green cryptocurrencies to offer a comprehensive picture of the green cryptocurrency ecosystem. (iii) This paper is the first to use the panel Granger causality to investigate investor attention in the cryptocurrency market which provides several advantages over the conventional Granger causality approach. (iv) This paper is the first to provide novel empirical evidence on the prevalent influence of investor attention in the green crypto market.