Abstract
Do behavioral factors mediate the relationship between industry returns and Bitcoin returns? We use four industry indices in technology, energy, clean energy, and banking, and the Sentiment index from Thomson Reuters Marketpsych Indices as a behavioral factor to investigate this question. We show that the sensitivities of technology and clean energy industry indices to Sentiment, positively and significantly, strengthen the relationship between sentiment and Bitcoin returns. By showing that behavioral factors mediate the association between the returns of industry indices and Bitcoin returns, we provide evidence that investors’ Sentiment captures the association between Bitcoin and sectors related to cryptocurrencies. Our results, however, do not support prior studies’ findings of a direct relationship between the industry indices and Bitcoin returns.
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