EcoFin Research Papers

This study examines whether investor sentiment constitutes a priced systematic risk factor that spans traditional equity markets and cryptocurrency markets. Using monthly data for 42 equity markets and 30 major cryptocurrencies over the period 2012–2024, we construct a global sentiment factor based on Google Trends search intensity and news-based tone indicators. We integrate this sentiment factor into standard asset pricing frameworks, including CAPM and Fama–French-type multi-factor models, and estimate factor loadings using time-series regressions and Fama–MacBeth cross-sectional tests. The results indicate that sentiment exposure is positively priced across both asset classes, with higher expected returns required for assets that are more sensitive to adverse sentiment shocks. The pricing effect is economically stronger for cryptocurrencies and for equity portfolios characterized by high growth orientation and low institutional ownership. These findings suggest that investor sentiment operates as a common non-fundamental risk factor across markets with heterogeneous fundamentals, challenging the view that sentiment effects are confined to speculative niches.

Investor sentiment, asset pricing, cryptocurrencies, cross-market risk factors, behavioral finance

G12, G14, G15

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