Market Stress and Herding: A New Approach to the Cryptocurrency Market

Júnior, Gerson de Souza Raimundo; Palazzi, Rafael Baptista; Tavares, Ricardo de Souza; Klötzle, Marcelo Cabús

doi:10.1080/15427560.2020.1821688

Cited by 38 publications

(18 citation statements)

References 52 publications

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“…It can be presumed that these investors demonstrated excessive herding behaviour due to fear of losing money in the Covid 19 period due to the market crashes, economic downturn, and uncertainty across global economies. Studies by Conrad et al [18], Silvia et al [19], Vidal-Thomas et al [20], Junior et al [22], Jalal et al [7] also confirmed the presence of herding behaviour during extreme market conditions.…”

Section: Herding Behaviour During Covid 19mentioning

confidence: 74%

“…Jalal et al [8] confirmed the presence of herding behaviour in the extreme conditions of bullish and high volatility market situations of major cryptocurrencies listed in CCI30 index and sub-major cryptocurrencies and major stock returns listed in Dow-Jones Industrial Average Index, from 2015 to 2018. Junior et al [22] noted a positive relationship between herding and market stress conditions. The studies on herding behaviour in the cryptocurrency market had established the presence of herding activity among investors during uncertain market conditions.…”

Section: Literature Reviewmentioning

confidence: 97%

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Does Herding Behaviour Among Traders Increase During Covid 19 Pandemic? Evidence from the Cryptocurrency Market

Susana¹,

Kavisanmathi²,

Sreejith³

2020

IFIP Advances in Information and Communication Technology

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Cryptocurrencies are digital currencies and trading these currencies have gained huge momentum in recent years. The sophisticated features, complexities on regulatory framework, and high volatility of Cryptocurrencies would pose trading challenges to new investors and/or investors with limited knowledge. Investors generally are influenced by fund managers, financial analysts or other investors who are considered as well informed and highly knowledgeable peers. Investors mimic their behaviour to perform trading activities and such behaviour is termed as Herding. Covid 19 pandemic triggered severe uncertainties in the cryptocurrencies market and has led to wide fluctuations in prices causing severe volatility and market crashes. This paper aims to examine the herding behaviour in cryptocurrency market during the pre Covid 19 and Covid 19 pandemic period using the Cross-Sectional Standard Deviation (CSSD) approach. The findings of the paper reveal that herding was evident among all the ten crypto-currencies in normal market conditions of the entire sample period but not during market upswing or downswing. However, the herding behaviour was present in the cryptocurrencies Litecoin, Cardano and Dash during the Covid 19 pandemic period in all market conditions.

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Section: Herding Behaviour During Covid 19mentioning

confidence: 74%

Section: Literature Reviewmentioning

confidence: 97%

Does Herding Behaviour Among Traders Increase During Covid 19 Pandemic? Evidence from the Cryptocurrency Market

Susana¹,

Kavisanmathi²,

Sreejith³

2020

IFIP Advances in Information and Communication Technology

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“…Herding has traditionally been studied in various markets worldwide, in institutional funds and even among financial analysts. However, interest in this behaviour has recently increased following the emergence of various cryptocurrencies, mainly focusing on price imitation between cryptocurrencies (Bouri et al 2019 ; da Gamma Silva et al 2019 ; Kallinterakis and Wang 2019 ; Stavroyiannis and Babalos 2019 ; Vidal-Tomás et al 2019 ; Ballis and Drakos 2020 ; Kaiser and Stöckl 2020 ; Kyriazis 2020 ; Philippas et al 2020 ; Raimundo Júnior et al 2020 ; Yarovaya et al 2021 ). The information sequences among different cryptocurrencies may have peculiar characteristics compared with stocks, bonds or other currencies, especially due to not only the underlying spirit and technology of this new type of asset but also other spot market indicators such as liquidity, scalability, and the lack of official recognition.…”

Section: Theoretical Framework and Hypothesesmentioning

confidence: 99%

“…Second, this study provides added value to the literature on cryptocurrencies. There have been some studies on herding behaviour among different cryptocurrencies (Bouri et al 2019 ; da Gamma Silva et al 2019 ; Kallinterakis and Wang 2019 ; Stavroyiannis and Babalos 2019 ; Vidal-Tomás et al 2019 ; Ballis and Drakos 2020 ; Kaiser and Stöckl 2020 ; Kyriazis 2020 or Raimundo Júnior et al 2020 ) and its relationship with some special events, such as the COVID-19 pandemic (Yarovaya et al 2021 ) and informative signals (Philippas et al 2020 ). However, none of these studies has focused on herding among exchanges around futures expiration.…”

Section: Introductionmentioning

confidence: 99%

The witching week of herding on bitcoin exchanges

2022

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This paper analyses the herding behaviour among exchanges around the expiration of bitcoin futures traded on the Chicago Mercantile Exchange (CME). The database extends from December 2017 to October 2020, taking as a reference the main exchanges that trade bitcoin (Binance, Bitfinex, Bitstamp, Coinbase, itBit, Kraken, and Gemini) and using hourly closing prices and trading volumes in bitcoin and US dollars. Adapting the proposal of Chang, Cheng and Khorana (2000) (CCK) to test conditional herding, we obtain results that indicate that the herding effect is significant during the week before expiration. After expiration, the herding effect lasts for a few hours and disappears. Information overload originating, among other causes, from sophisticated investors’ strategies may generate this mimetic behaviour. The results show the relevance of intraday data applied to specific events such as expiration since the unconditional analysis shows, in general, anti-herding behaviour throughout the period of study.

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“… 7 A similar approach is used in recent papers on herding, see e.g. Raimundo Júnior et al (2020) and Hwang et al (2020) . …”

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confidence: 99%