Crypto Exposure, Relevance, and Return Dynamics: Evidence from Textual Analysis

We examine whether crypto disclosures in firms' 10-K filings produce a lasting link between shareholder value and future crypto developments. Using textual similarity between crypto-related 10-K text and subsequent news coverage, we measure the relevance of crypto developments to individual firms. We find that stock returns co-move with crypto market sentiment only when the underlying news is relevant to the firm. We further construct sentiment- and relevance-based crypto risk factors that strongly explain the portfolio returns of crypto-exposed stocks. We highlight how firms’ crypto activities and exposure change their risk profile, with implications for asset pricing and equity market stability.