Herding on Fundamental/Nonfundamental Information During the COVID-19 Outbreak and Cyber-Attacks: Evidence From the Cryptocurrency Market

Imran Yousaf,Elie Bouri,Anupam Dutta,Shoaib Ali

doi:10.1177/21582440211029911

Imran Yousaf, Elie Bouri + Show 2 more

Open Access

https://doi.org/10.1177/21582440211029911

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Abstract

We provide an empirical analysis of herding behavior in cryptocurrency markets during COVID-19 and periods of cyber-attacks, differentiating between fundamental and nonfundamental herding. The results show that herding behavior is driven by fundamental information during the full sample period and the cyber-attack days. However, herding is not prevalent during the COVID-19 outbreak, either when reacting to fundamental or nonfundamental information. This finding suggests heterogeneity in the behaviors of participants in the cryptocurrency markets during the COVID-19 period.

Highlights

It is often argued that herding behavior among investors challenges the efficient market hypothesis and can explain some of behavioral anomalies in the financial markets
The coefficient of β3 is positive in both total and fundamental cross-sectional absolute deviations (CSAD)-based regressions, whereas it is negative but insignificant in nonfundamental CSAD-based regression. These results indicate no evidence of total, spurious, or intentional herding during the COVID-19 period, suggesting heterogeneity in the behaviors of participants in the cryptocurrency markets during the COVID-19 period
The related literature is unclear about whether herding behavior in cryptocurrencies is significant during specific informational events related to COVID-19 and to cyberattacks

Summary

Introduction

It is often argued that herding behavior among investors challenges the efficient market hypothesis and can explain some of behavioral anomalies in the financial markets. Keywords cryptocurrency markets, herding behavior, COVID-19 outbreak, cyber-attacks, fundamental/nonfundamental information No study has so far examined whether specific informational events related to the unprecedented COVID-19 outbreak and cyber-attacks induce herding behavior and whether herding in the cryptocurrency markets is driven by fundamental or nonfundamental information.

Results

Conclusion