Abstract:
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This paper revisits the linkage between cryptocurrencies and public disclosed preferences, proxied by online searches. We show that cryptocurrencies are not related to a general uncertainty index as measured by the Google Trends data by Castelnuovo and Tran (2017). Instead, cryptocurrencies are linked to a Google Trends attention measure specific for this market. In particular,
we find a bidirectional flow of information between Google Trends attention and cryptocurrency
returns up to six days. Moreover, information flows from cryptocurrency volatility to Google
Trends attention seem to be larger than those in the other direction. Finally, we report a significant tail dependence between cryptocurrency returns and Google Trends. These relations hold
for the five cryptocurrencies analyzed and different compositions of the proposed Google Trends
Cryptocurrency index.
Keywords: Cryptocurrencies, Google Trends, transfer entropy, market attention
JEL: C4, G01, G14 |