Deciphering Sentiments in Finance : Cryptocurrency Versus Islamic Stock Prices

This study investigates the dynamic interplay between market sentiment and the price movements of two distinct asset classes: cryptocurrencies, represented by Bitcoin, and Islamic stock index, represented by the S&P 500 Shariah Index, over the period from 2011 to 2023. Employing Google Search Volume (GSV) as a proxy for sentiment, this study explores the extent to which sentiment influences the prices of these asset classes, offering a new comparative analysis. In addition to the sentiment, the analysis considers other fundamental and macroeconomic factors in the model, including market volatility, gold price, oil price, and the economic policy uncertainty index. Through a rigorous methodological framework that includes quantile regression, Johansen Cointegration, Vector Error Correction Model (VECM), Variance Decomposition (VDC), and Granger Causality, the research provides a comprehensive examination of the sentiment-price relationship.

The findings reveal that Bitcoin prices exhibit a strong sensitivity to sentiment, as captured by GSV. At the same time, the Islamic stock index shows a more nuanced response, driven by both sentiment and a distinct set of fundamental and macroeconomic factors, highlighting fundamental differences in how sentiment dynamics impact these markets. By bridging the gap between modern digital assets and traditional Islamic financial instruments, this study contributes valuable insights into the evolving dynamics of global finance, underscoring the importance of sentiment analysis in understanding market behaviors. The implications of this research extend beyond scholarly contribution, offering practical guidance for investors, financial analysts, and policymakers navigating the complexities of the digital age.