Abstract
This paper investigates the existence of herding behavior in cryptocurrencies market. Using data of the 20 large cryptocurrencies and MV Index Solution Crypto Compare Digital Assets for large cap index, we found no evidence of herding behavior using cross-sectional absolute standard deviation estimation. However, by applying a rolling window analysis, the results show significant herding behavior, which varies over time. Finally, we find an inverse relationship between herding behavior and the Bloomberg consumer comfort index which means that when traders are less comfortable they prefer to ignore their expectations and follow the market performance.
Highlights
We try in this paper to find a response to the question: does herding behavior exist in cryptocurrency market? To do this, we investigate the existence of this behavior using cross-sectional absolute dispersion (CSAD) on the sample of 20 large cryptocurrencies
The results show that the coefficient α1 is positive and statistically significant, which means that the CSADs of returns on cryptocurrencies are a growing function of the absolute value of market (MVIS)
We used the cross-sectional absolute deviation measure of Chang et al (2000) to detect herding behavior using a sample of 20 cryptocurrencies that constitute the MVIS large cap digital index from 1 January 2015 to 31 January 2019
Summary
For instance, intuits a sense of security when he or she fits in a particular community because the person enjoys a robust social life, and it offers a platform for the exchange of ideas and information Such dynamics underscore why the herding mentality exists in the financial markets; people’s emotions prompt them to make irrational decisions. Whenever a financial crash or bubble occurs in the market under consideration, it prompts some traders to either purchase or vend a particular commodity and, as one would anticipate, a considerable number of people would follow suit This emotional contagion engenders pecuniary insatiability in speculative bubbles and aversion to Amina Amirat. Prior to joining University of Jeddah, she worked between 2009 and 2016 as full position in high school of business (Algeria), central university (Tunisia), and Najran university (KSA). She published several articles in refereed journals and attended different international conferences
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