The Effects of a 'Black Swan' Event (COVID-19) on Herding Behavior in Cryptocurrency Markets: Evidence from Cryptocurrency USD, EUR, JPY and KRW Markets

Yarovaya, Larisa; Matkovskyy, Roman; Jalan, Akanksha

doi:10.2139/ssrn.3586511

Cited by 76 publications

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“…Other studies investigate herding in the stock and the cryptocurrency markets. While, Yarovaya (2020) finds no evidence of increased herding in the cryptocurrency markets during the COVID-19 period, Kizys et al (2020) show that regulatory restrictions implemented by regulators reduce investor herding in international stock markets during the pandemic. Thus, this paper aims to complement the embryonic literature on COVID-19 by discussing the actions undertaken by governments and bank prudential regulators to lessen the economic fallout from the pandemic and maintain the supply of credit.…”

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confidence: 99%

A Note on Regulatory Responses to Covid-19 Pandemic: Balancing Banks’ Solvency and Contribution to Recovery

Bitar

Tarazi

2020

SSRN Journal

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We see spikes in unemployment rates and turbulence in the securities markets during the COVID-19 pandemic. Governments are responding with aggressive monetary expansions and large-scale economic relief plans. We discuss the implications on banks and the economy of prudential regulatory intervention to soften the treatment of non-performing loans and ease bank capital buffers. We apply these easing measures on a sample of Globally Systemically Important Banks (G-SIBs) and show that these banks can play a constructive role in sustaining economic growth during the COVID-19 pandemic. However, softening the treatment of non-performing loans along with easing capital buffers should not undermine banks' solvency in the recovery period. Banks should maintain usable buffer in the medium-term horizon to absorb future losses, as the effect of COVID-19 on the economy might take time to fully materialise.

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Section: Insert Figure [1] Around Herementioning

confidence: 99%

A Note on Regulatory Responses to Covid-19 Pandemic: Balancing Banks’ Solvency and Contribution to Recovery

Bitar

Tarazi

2020

SSRN Journal

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“…Recent research studies have emerged that involve the impact of COVID-19 on the financial market, including cryptocurrencies [1][2][3][4][5][6][7][8]. It was illustrated that Bitcoin is not a safe haven [1,2].…”

Section: Introductionmentioning

confidence: 99%

“…The co-movement between Bitcoin and daily data of COVID-19 world deaths is examined in [6]. The herding behavior in the cryptocurrency market has been explored in [7]. The association between the stock market volatility and policy responses to the COVID-19 outbreak is studied in [8].…”

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confidence: 99%

A Complete VADER-Based Sentiment Analysis of Bitcoin (BTC) Tweets during the Era of COVID-19

Pano

Kashef

2020

BDCC

135

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During the COVID-19 pandemic, many research studies have been conducted to examine the impact of the outbreak on the financial sector, especially on cryptocurrencies. Social media, such as Twitter, plays a significant role as a meaningful indicator in forecasting the Bitcoin (BTC) prices. However, there is a research gap in determining the optimal preprocessing strategy in BTC tweets to develop an accurate machine learning prediction model for bitcoin prices. This paper develops different text preprocessing strategies for correlating the sentiment scores of Twitter text with Bitcoin prices during the COVID-19 pandemic. We explore the effect of different preprocessing functions, features, and time lengths of data on the correlation results. Out of 13 strategies, we discover that splitting sentences, removing Twitter-specific tags, or their combination generally improve the correlation of sentiment scores and volume polarity scores with Bitcoin prices. The prices only correlate well with sentiment scores over shorter timespans. Selecting the optimum preprocessing strategy would prompt machine learning prediction models to achieve better accuracy as compared to the actual prices.

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“…Very recent papers examine the impact of COVID-19 across industries (Goodell and Huynh, 2020). Others are examining the impact of COVID-19 on herding behavior (Yarovaya, Matkovskyy, and Jalan, 2020) and examining co-movements across commodities, equities, and economic policy uncertainty (Aloui et al, 2020;Sharif, Aloui, and Yarovaya, 2020). Of particular relevance to this paper, others are examining the correlations, hedging, diversifying and safe haven properties of cryptocurrencies with respect to how previously identified relations have changed during the COVID-19 crisis Conlon, Corbet, and McGee, 2020;Goodell and Goutte, 2020).…”

Section: Introduction and Motivationsmentioning

confidence: 99%

Diversifying with Cryptocurrencies during COVID-19

Goodell

Goutte

2020

SSRN Journal

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Literature suggests assets become more correlated during economic downturns. The current COVID-19 crisis provides an unprecedented opportunity to investigate this considerably further. Further, whether cryptocurrencies provide a diversification for equities is still an unsettled issue. Additionally, the question of whether cryptocurrency futures are safe havens has received very little attention. We employ several econometric procedures, including wavelet coherence, copula principal component, and neural network analyses to rigorously examine the role of COVID-19 on the paired co-movements of six cryptocurrencies, as well as bitcoin futures, with fourteen equity indices and the VIX. We find co-movements between cryptocurrencies and equity indices gradually increased as COVID-19 progressed. However, most of these co-movements are positively correlated, suggesting that cryptocurrencies do not provide a diversification benefit during downturns. Exceptions, however, are the co-movements of bitcoin futures and tether being negative with equities. Results are consistent with investment vehicles that attract either more informed or more speculative investors differentiating themselves as safe havens.

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The Effects of a 'Black Swan' Event (COVID-19) on Herding Behavior in Cryptocurrency Markets: Evidence from Cryptocurrency USD, EUR, JPY and KRW Markets

Cited by 76 publications

References 0 publications

A Note on Regulatory Responses to Covid-19 Pandemic: Balancing Banks’ Solvency and Contribution to Recovery

A Note on Regulatory Responses to Covid-19 Pandemic: Balancing Banks’ Solvency and Contribution to Recovery

A Complete VADER-Based Sentiment Analysis of Bitcoin (BTC) Tweets during the Era of COVID-19

Diversifying with Cryptocurrencies during COVID-19

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