Attention allocation and cryptocurrency return co-movement: Evidence from the stock market

We employ extreme S&P500 returns as an attention-distraction shock event to explore the impact of investor attention allocation on the return co-movement with cryptocurrency markets. We find that the occurrence of extreme S&P500 returns distracts investor attention away from cryptocurrency markets and this shock event increases the return co-movement within cryptocurrency markets. Further, the effect is asymmetric, with a negative return shock having a greater impact on the return co-movement than a positive return shock. Our findings are beneficial to investors, as well as to researchers who are interested in investor attention allocation, return co-movement and cryptocurrencies.