Network hype and asset pricing of cryptocurrencies: evidence based on a Google-attention approach

摘要

The rapid development of cryptocurrencies motivates us to examine the factors that drive cryptocurrency prices. Using Google attention innovation to measure network hype or investor speculation, this paper investigates the effect of network hype in the cryptocurrency market and proposes a three-factor asset pricing model composed of the market, size, and network hype factors. This paper is the first empirical study on asset pricing in cryptocurrency markets and is a unique attempt to value the cryptocurrencies prices using a factor model. The empirical results show: 1) there is a positive and significant effect of network hype in the cryptocurrency market, and network hype plays a significant role in increasing cryptocurrency prices; 2) average excess returns of cryptocurrencies are negatively correlated with their size and have a significant positive correlation with Google attention innovation; 3) our three-factor model has strong explanatory power for excess cryptocurrency returns and can explain the momentum, reversal, and liquidity factors in the cryptocurrency market.