A Study on Information Asymmetry and Investor Sentiment in the Cryptocurrency Market based on the Economic Policy Uncertainty Index (EPU)
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The primary objective of this study is to gain insight into the information asymmetry that occurs within the cryptocurrency market and compare the investment behaviors of investors in response to the market's expansion with those in the traditional stock market. To achieve this goal, this paper examined cryptocurrency transaction data spanning 1333 days and adopted the Probability of Informed Trading model (PIN), which is a widely recognized model for estimating the proportion of informed and non-informed investor transactions based on available information. Additionally, the study investigated the relationship between the Economic Policy Uncertainty Index (EPU) and investment behavior to explore how individual investment sentiment impacts non-informed transactions. The findings of this analysis identified that the impact of EPU varied across different types of cryptocurrencies, with Bitcoin being particularly influenced by the EPU of the United States, while the influence of Singapore's EPU was comparatively low. Consequently, it concludes by proposing the implementation of a disclosure system as a means to foster a robust cryptocurrency market as global cryptocurrency trading volume continues to grow.
Abstract
The primary objective of this study is to gain insight into the information asymmetry that occurs within the cryptocurrency market and compare the investment behaviors of investors in response to the market's expansion with those in the traditional stock market. To achieve this goal, this paper examined cryptocurrency transaction data spanning 1333 days and adopted the Probability of Informed Trading model (PIN), which is a widely recognized model for estimating the proportion of informed and non-informed investor transactions based on available information. Additionally, the study investigated the relationship between the Economic Policy Uncertainty Index (EPU) and investment behavior to explore how individual investment sentiment impacts non-informed transactions. The findings of this analysis identified that the impact of EPU varied across different types of cryptocurrencies, with Bitcoin being particularly influenced by the EPU of the United States, while the influence of Singapore's EPU was comparatively low. Consequently, it concludes by proposing the implementation of a disclosure system as a means to foster a robust cryptocurrency market as global cryptocurrency trading volume continues to grow.
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