The relative importance of competition to contagion: evidence from the digital currency market

Abstract

How does the valuation change of an industry leader influence its competitors? Does it induce a competitive effect or a contagion effect? What are the driving forces of such influences? We attempted to answer these questions within digital currency markets. We found that both close and distant competitors against an industry leader experience high competitive effects, while moderate competitors experience high contagion effects. Next, we empirically demonstrated how this Ushaped pattern reduces to a linear relationship depending on the industry concentration. Lastly, we identified eight distinct information categories from a social media platform of the industry leader and compared the influence of the eight information categories on the industry leader's competitors. Our analysis suggests that the relative importance of the competitive effect to the contagion effect in the industry depends on the category of the information.

The Impact of Scandalous News in the Automobile Manufacture on Companies from the Same Industry: A Comparative Study on the Chinese and European Markets

“…A rival firm experiences both, the contagion effect (stock prices of competitors move in the same direction), which affects all the competitors in the industry at the same time, and competitive effect (stock prices of competitors move in the opposite direction), led by firm-specific information. Xie et al (2019) argue that the net effect (the relative importance of competitive effect to contagion effect) depends on two factors: the relative size of intra-industry competitors and the type of information spilling over the social media. Hence, according to competition level, close and distant competitors against an industry leader experience high competitive effects, while moderate competitors experience high contagion effects.…”

A Scientometric Review of Digital Currency and Electronic Payment Research: A Network Perspective

“…Ranked by recentness, four major clusters are derived. Combining with burst detection, we demonstrate two probable research fronts: (1) how social media and investor sentiment affect the market of digital currencies [74,75]; (2) the impact of digital currencies on central bank, monetary policy, and central bank digital currency [80][81][82].…”

“…e keywords followed by " * " are with citation bursts, notably "digital currency" and "money" (see Figure 8). 10 Complexity Cluster #10 is mainly related to behavioral finance and focuses on how social media and investor sentiment affects cryptocurrency markets [74,75]. Cluster #11 focuses on the price discovery determinants and volatility dynamics of digital currencies [76,77].…”

The event study in international business research: Opportunities, challenges, and practical solutions

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