How well do investor sentiment and ensemble learning predict Bitcoin prices?

Investor sentiment is widely recognized as the major determinant of cryptocurrency prices. Although earlier research has revealed the influence of investor sentiment on cryptocurrency prices, it has not yet generated cohesive empirical findings on an important question: How effective is investor sentiment in predicting cryptocurrency prices? To address this gap, we propose a novel prediction model based on the Bitcoin Misery Index, using trading data for cryptocurrency rather than judgments from individuals who are not Bitcoin investors, as well as bagged support vector regression (BSVR), to forecast Bitcoin prices. The empirical analysis is performed for the period between March 2018 and May 2022. The results of this study suggest that the addition of the sentiment index enhances the predictive performance of BSVR significantly. Moreover, the proposed prediction system, enhanced with an automatic feature selection component, outperforms state-of-the-art methods for predicting cryptocurrency for the next 30 days.     

Causality-in-mean and causality-in-variance among electricity prices,crude oil prices,and yen–US dollar exchange rates in Japan

In this study, we test the Granger-causality-in-mean and Granger-causality-in-variance among electricity prices, crude oil prices, and yen-to-US-dollar exchange rates in Japan using a cross-correlation function approach. We find Granger-causality-in-mean from neither the exchange market nor the oil market to the power market; the same was true of Granger-causality-in-variance, although both the exchange rates and oil prices greatly influence power generation costs in Japan. We suspect the efficiency of this market is at play.     

Causality-in-mean and causality-in-variance among electricity prices,crude oil prices,and yen–US dollar exchange rates in Japan

In this study, we test the Granger-causality-in-mean and Granger-causality-in-variance among electricity prices, crude oil prices, and yen-to-US-dollar exchange rates in Japan using a cross-correlation function approach. We find Granger-causality-in-mean from neither the exchange market nor the oil market to the power market; the same was true of Granger-causality-in-variance, although both the exchange rates and oil prices greatly influence power generation costs in Japan. We suspect the efficiency of this market is at play.     

Investor sentiment and the mean–variance relation

This study shows the influence of investor sentiment on the market's mean–variance tradeoff. We find that the stock market's expected excess return is positively related to the market's conditional variance in low-sentiment periods but unrelated to variance in high-sentiment periods. These findings are consistent with sentiment traders who, during the high-sentiment periods, undermine an otherwise positive mean–variance tradeoff. We also find that the negative correlation between returns and contemporaneous volatility innovations is much stronger in the low-sentiment periods. The latter result is consistent with the stronger positive ex ante relation during such periods.     

Risk sentiment and firms’ liquidity in the French market

This paper investigates the impact of risk sentiment on market liquidity by using panel data. We use six risk word lists; uncertain, weak model, negative, legal, opportunity, and environmental & social responsibility word lists to measure the risk sentiment. Concerning the liquidity proxies, we use three measures, quoted spread, effective spread, and adverse selection component. The results indicate that an intensive risk tone and uncertain information in annual reports lead to decreased liquidity. In addition we find that risk sentiment variable impacts the liquidity but not vice versa.     

Trading by bank insiders before and during the 2007–2008 financial crisis

This paper sheds new light on the role bank executives played in the financial crisis. It examines whether they foresaw the poor performance of their own bank by analyzing their insider trading patterns. Insider trading during 2006 predicts stock returns during the crisis: a portfolio strategy based on insider trading information earns a risk-adjusted return of over 40% during the crisis. Further, banks with a high exposure to the housing market and banks with a low exposure exhibit different insider trading patterns starting in mid-2006, when US housing prices first decline: insiders of high-exposure banks are 20% more likely to sell stock than insiders of low-exposure banks. This pattern is more pronounced for CEOs than other insiders. However, insider trading patterns of high- and low-exposure banks do not differ before 2006. Replacing high-exposure banks by too-big-too-fail banks yields similar results. This evidence indicates that insiders of high-exposure and too-big-too-fail banks revised their assessment of their banks’ investments following the reversal in the housing market.     

Investor sentiment and the risk–return relation: A two-in-one approach

Traditional finance theory posits a positive risk–return relation, but empirical evidence is inconclusive. Retail investor sentiment has long been viewed as a distorting factor, while more recently institutional investor sentiment is thought to play a role. We examine the separate and joint impacts of retail and institutional investor sentiments on the risk-return relation. We find, at both market and firm levels, the risk-return relation is more likely to be distorted by the two investor-type sentiments jointly, rather than separately. We further find a cross-sectional pattern, with the risk-return relation being more sensitive to investor sentiment for stocks with specific characteristics.     

The Role of Ownership Concentration and Debt in Downturns: Evidence from Brazilian Firms During the 2008–9 Financial Crisis

This article aims to reconcile conflicting literature about the role of ownership concentration in the responsiveness of stock prices to macroeconomic shocks. We modified a previous theoretical model, adding leverage as a disciplining device. An important implication of our model is that only in deep crises ownership concentration plays a role in attenuating the effect of macroeconomic shock on firm value. We test this hypothesis using a sample of Brazilian firms during distinct phases of the 2008–9 crisis. Our empirical analyzes shows that only in the most critical part of the crisis, ownership concentration reduced the negative effects of the financial crisis.     

Does Financial Openness Matter in the Relationship Between Financial Development and Income Distribution in Latin America?

This article examines the effect of financial development on income distribution by analyzing a sample of Latin American countries according to their degree of financial openness for the 1990–2011 period. The period includes the time before and after financial liberalization for most of the countries in the region. As the literature provides inconclusive results regarding the relationship between financial development and income inequality, we aim to determine whether financial openness plays a role in this relationship. Our results provide an explanation for why some countries regardless of their degree of financial openness cannot achieve a reduction in income inequality.     

What Determined the Great Cap Rate Compression of 2000–2007, and the Dramatic Reversal During the 2008–2009 Financial Crisis?

In this paper we revisit the many studies that have attempted to explain the determinants of commercial real estate capitalization rates. We introduce two new innovations. First we are able to incorporate two macroeconomic factors that greatly impact cap rates besides treasury rates and local market fundamentals – the variables most commonly used in such research. These are the general corporate risk premium operating in the economy, and the growth rate of debt relative to GDP in the general economy (liquidity). The addition of these factors greatly adds to the ability of previous models to explain the secular fall of cap rates in the last decade and their recent rise – in terms of traditional measures of within-sample fit. Our second innovation is methodological; our analysis uses a large and robust quarterly panel data set of over 30 US metropolitan areas from 1980q1 through 2009q3. With this data we compare 3 models: a “base model” and then one that selectively adds each of our macro-economic variables. We test the ability of each of these models to fit the 2002–2009 period using “back test” dynamic forecasts. Our conclusion is that much of the secular decline in cap rates from 2000 through 2007 and their subsequent rise seem attributable to the macro-economic factors and less to movements in market fundamentals.     

Political–security risk in the oil and gas industry: the impact of terrorism on risk management and mitigation

Oil and gas companies are experiencing an increase in terrorist attacks. The industry became a legitimate target for terrorist groups in the 1990s and the number of attacks have increased yearly, with a spike after the 9/11 attacks. In today’s interconnected world, political risk is not only about the relationship between the host government and the company. Oil and gas companies may experience risks on a transnational, national and human security level. The success of new investments often depends on the successful utilization of risk management strategies. This study focuses on the importance of political–security risk in the oil and gas industry. In January 2013, the oil and gas industry experienced one of its deadliest attacks at the In Amenas gas facility in Algeria, forcing firms to reconsider its focus on security management. Statoil undertook a thorough analysis of security at the site as well as of the company′s corporate security risk management. The report revealed a lack of focus on political–security risk. This study argues that political–security risk has not been used to its full potential in the oil and gas industry. The oil and gas industry has always focused on site security, but a broader more holistic approach to risk management has been lacking. As a result of the In Amenas incident, the industry has become more willing to have a new discussion on security and this has resulted in changes in the way companies operate.     

Information asymmetry,east–west cultural differences,and divergence in investor reactions

This paper investigates the divergence in investor behaviour between the United States and China following the abolition of the Chinese presidential term limit in 2018, which may, in part, have reflected the heterogeneous opinions expressed in public online media regarding this event. Compared with Chinese investors, the sentiment among US investors was considerably more pessimistic. Accordingly, we find that Chinese companies listed in the United States significantly underperformed relative to a sample of propensity score-matched firms listed in China. Additionally, we find that the political connectedness of firms to the Chinese government strongly influenced the stock prices of US-listed Chinese firms.     

Food prices,tax reforms and consumer Welfare in Tanzania 1991–2007

This paper analyses the effect of observed food price changes on household consumption (welfare) in Tanzania and from this simulates the welfare effect attributable to tax (tariffs and VAT) reforms. The three rounds of the Tanzania Household Budget Survey (1991/92, 2000/01 and 2007) are used to apply Deaton’s method based on median unit values (prices) and household budget shares. The results indicate that real price increases over 1991–2007 have reduced welfare of the average household by 20 per cent of 1991 income, and the loss was fairly evenly distributed between the 1990s and 2000s. The welfare loss was much greater for the poor, especially the rural poor (a 27 per cent reduction), compared to the non-poor (in particular the urban non-poor, who suffered a five per cent loss). Although we cannot establish explicit links between tax reforms and domestic commodity price changes, to assess the extent to which welfare changes can be explained by tax reforms we simulate the effects of tax changes on domestic price changes. The simulation shows that tax reforms (tariff reductions) offset the welfare losses for all household groups, especially in the 1990s; although the differences were small, the urban poor benefit more in relative terms from tax reforms whereas the rural poor benefit least (the effect on the non-poor was similar irrespective of location).     

Government spending,interest rates,prices, and budget deficits in the United Kingdom, 1701–1918

The British data from the early 1700s through WWI provide an unmatched opportunity for studying temporary changes in government purchases. Temporary increases, which appeared mainly as wartime spending, raised long-term interest rates, but significantly increased the growth rates of money and prices only during suspensions of the gold standard (1797–1821 and 1914–1918). Temporary changes in military spending accounted for the bulk of budget deficits; over the sample of more than 200 years, I found only two major non-war deficits — one associated with compensation payments to slaveowners in 1835–1936 and the other with a dispute over the income tax in 1909–1910. Interest rates did not react much to these ‘exogenous’ deficits.     

The influence of oil prices on the banking sector in oil-exporting economies: Is there a psychological barrier?

This paper examines the relationship between crude oil prices and banking sector market indices in the oil-exporting economies of the Gulf Cooperation Council (GCC), using daily frequency data over 2010–2017. Controlling for global banking impacts (S&P500 Banking Index) and interest rates (T-bills), dynamic ordinary least squared (DOLS) and fully modified ordinary least squared (FM-OLS) analysis indicates that oil prices positively affect bank indices until the $95 per barrel mark, after which the impact becomes negative, close to the psychological barrier found in the US equity market. The S&P500 Banking Index positively affects the GCC banking sector, whereas the interest rate affects it negatively. The validity of an inverse U-shaped relationship between crude oil price and banking sector indices is demonstrated. Causality analysis reveals the existence of bidirectional causalities between the prices of crude oil, GCC banking sectors, and the US banking sector. This paper demonstrates a vital non-linear relationship for oil-banking portfolio management and hedging strategies with oil price risk.     

Ambiguity shifts and the 2007–2008 financial crisis

Faced with doubts about the quality of information and the quality of modeling techniques, ambiguity-averse agents assign higher probabilities to lower utility states, leading to higher CDS premia and lower equity prices. Using data on financial institutions, I find that the sudden increases in credit spreads during the recent crisis can be explained by changes in the amount of ambiguity faced by market participants and changes in how the total amount of ambiguity was distributed between ambiguity about information quality and ambiguity about model quality.     

Bank ownership and lending patterns during the 2008–2009 financial crisis: Evidence from Latin America and Eastern Europe

This paper examines the impact of bank ownership on credit growth in developing countries before and during the 2008–2009 crisis. Using bank-level data for countries in Eastern Europe and Latin America, we analyze the growth of banks’ total gross loans as well as the growth of corporate, consumer, and residential mortgage loans. While domestic private banks in Eastern Europe and Latin America contracted their loan growth rates during the crisis, there are notable differences in foreign and government-owned bank credit growth across regions. In Eastern Europe, foreign bank total lending fell by more than domestic private bank credit. These results are primarily driven by reductions in corporate loans. Furthermore, government-owned banks in Eastern Europe did not act counter-cyclically. The opposite is true in Latin America, where the growth of government-owned banks’ corporate and consumer loans during the crisis exceeded that of domestic and foreign banks. Contrary to the case of foreign banks in Eastern Europe, those in Latin America did not fuel loan growth prior to the crisis. Also, there are less pronounced and robust differences in the behavior of foreign and domestic banks during the crisis in Latin America.     

An investigation into feedback and spatial relationships between banks’ share prices and sovereign bond spreads during the euro crisis

We examine (1) spillover effects between euro-area sovereigns and banking systems within national jurisdictions and (2) cross-country spillovers among ten countries during the euro-area crisis. We find that cross-country spillovers substantially amplify the doom loops between the sovereign and banking sectors. We also provide a test that supports the hypothesis that cross-country spillovers among southern-euro-area countries were of a different order from the spillovers among northern-euro-area countries. Our results also imply that, if shocks are idiosyncratic, spillover effects may help in reducing the impact for northern countries.     

Has the correlation of inflation and stock prices changed in the United States over the last two centuries?

The relationship between stock prices and the inflation can be either negative or positive, depending on the strengths of various theoretical channels at work. In this study, we examine the dynamic conditional correlations of stock prices and inflation in the United States over the period of 1791–2015 under a time-varying framework. The results of our empirical analysis reveal that correlations between the inflation and stock prices in the United States evolve heterogeneously overtime. In particular, the correlations are significantly positive in the 1840s, 1860s, 1930s and 2011, and significantly negative otherwise. The policy implications of these findings are then discussed.     

Market liquidity and institutional trading during the 2007–8 financial crisis

This paper shows that institutional sell-side herding increased bid–ask spreads and liquidity risk during the 2007–8 financial crisis. Such an impact on liquidity is most pronounced in firms with large numbers of institutions that sold the same stocks, that is, have correlated trades. For the same reason, we find institutional investors with a dedicated, buy-and-hold, investment style to be the least likely to herd; their trading activity did not affect stock market liquidity during the crisis. Our results are robust to alternative explanations, different test specifications and consistent with recent theories highlighting the negative impact of institutional trading activity on market liquidity during a crisis.