Dynamics of Herding Behavior in Cryptocurrency Markets Amid Market Crashes
Herding behavior is expected to intensify with increasing uncertainty in financial markets, especially after jarring structural changes such as thepandemic. For this reason, in this study we examined herding behavior in the cryptocurrency market amid market crashes. Using daily cryptocurrency price...
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| Format: | Article |
| Language: | English |
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Istanbul University Press
2023-12-01
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| Series: | Journal of Economy Culture and Society |
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| Online Access: | https://dergipark.org.tr/en/download/article-file/3102278 |
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| author | Muhammed Aslam Chelery Komath Ozlem Sayılır Bakhtiyar Garayev Patrice Racine Dıallo |
| author_facet | Muhammed Aslam Chelery Komath Ozlem Sayılır Bakhtiyar Garayev Patrice Racine Dıallo |
| author_sort | Muhammed Aslam Chelery Komath |
| collection | DOAJ |
| description | Herding behavior is expected to intensify with increasing uncertainty in financial markets, especially after jarring structural changes such as thepandemic. For this reason, in this study we examined herding behavior in the cryptocurrency market amid market crashes. Using daily cryptocurrency price data in 02.01.2018 - 22.03.2023 of the 9 most traded cryptocurrencies, the presence of herding behavior was investigated using the cross-sectional absolute deviation (CSAD) method. The dynamics of herding behavior was explored in 3 sub-periods: the Pre-Covid Period, the Covid-19 Period and the Post Market Crash Period after Tesla’s Announcement. We also tested if the largest cryptocurrencies were driving small cryptocurrencies in the 3 sub-periods as well as the whole period. The findings of the study reveal that there is no herding in the market in significant market fluctuations. Moreover, there seems to be no asymmetric herding behavior as we distinguish between up and down markets. Hence, our findings imply rational investment decision-making. Yet, the results indicate that the largest cryptocurrencies are wielding a substantial influence over the rest of the market across the overall period and in the Post Covid Period (Period 2) in both up and down markets. However, in Period 1 and Period 3, the herding of small cryptocurrencies varies depending on whether the market returns are positive or negative. Our findings imply that the dynamics of the herding behavior between large and small cryptocurrencies has shifted with significant market crashes (outbreak of Covid-19, Tesla’s announcement). |
| format | Article |
| id | doaj-art-d1a890b590064dd0a6ceb030cb83bcba |
| institution | Kabale University |
| issn | 2645-8772 |
| language | English |
| publishDate | 2023-12-01 |
| publisher | Istanbul University Press |
| record_format | Article |
| series | Journal of Economy Culture and Society |
| spelling | doaj-art-d1a890b590064dd0a6ceb030cb83bcba2025-02-04T10:17:23ZengIstanbul University PressJournal of Economy Culture and Society2645-87722023-12-016813014010.26650/JECS2023-12874864Dynamics of Herding Behavior in Cryptocurrency Markets Amid Market CrashesMuhammed Aslam Chelery Komath0https://orcid.org/0000-0002-5991-7476Ozlem Sayılır1https://orcid.org/0000-0001-9598-3545Bakhtiyar Garayev2https://orcid.org/0000-0002-5789-6368Patrice Racine Dıallo3https://orcid.org/0000-0003-1800-1725Anadolu University, Graduate School of Social Sciences, Business Administration/Finance ProgramAnadolu University, Faculty of Business AdministrationGraduate School of Social Sciences, Business Administration/Finance ProgramAnadolu University, Graduate School of Social Sciences, Business Administration/Finance ProgramHerding behavior is expected to intensify with increasing uncertainty in financial markets, especially after jarring structural changes such as thepandemic. For this reason, in this study we examined herding behavior in the cryptocurrency market amid market crashes. Using daily cryptocurrency price data in 02.01.2018 - 22.03.2023 of the 9 most traded cryptocurrencies, the presence of herding behavior was investigated using the cross-sectional absolute deviation (CSAD) method. The dynamics of herding behavior was explored in 3 sub-periods: the Pre-Covid Period, the Covid-19 Period and the Post Market Crash Period after Tesla’s Announcement. We also tested if the largest cryptocurrencies were driving small cryptocurrencies in the 3 sub-periods as well as the whole period. The findings of the study reveal that there is no herding in the market in significant market fluctuations. Moreover, there seems to be no asymmetric herding behavior as we distinguish between up and down markets. Hence, our findings imply rational investment decision-making. Yet, the results indicate that the largest cryptocurrencies are wielding a substantial influence over the rest of the market across the overall period and in the Post Covid Period (Period 2) in both up and down markets. However, in Period 1 and Period 3, the herding of small cryptocurrencies varies depending on whether the market returns are positive or negative. Our findings imply that the dynamics of the herding behavior between large and small cryptocurrencies has shifted with significant market crashes (outbreak of Covid-19, Tesla’s announcement).https://dergipark.org.tr/en/download/article-file/3102278herding behaviorcryptocurrency marketsmarket crashescovid-19 |
| spellingShingle | Muhammed Aslam Chelery Komath Ozlem Sayılır Bakhtiyar Garayev Patrice Racine Dıallo Dynamics of Herding Behavior in Cryptocurrency Markets Amid Market Crashes Journal of Economy Culture and Society herding behavior cryptocurrency markets market crashes covid-19 |
| title | Dynamics of Herding Behavior in Cryptocurrency Markets Amid Market Crashes |
| title_full | Dynamics of Herding Behavior in Cryptocurrency Markets Amid Market Crashes |
| title_fullStr | Dynamics of Herding Behavior in Cryptocurrency Markets Amid Market Crashes |
| title_full_unstemmed | Dynamics of Herding Behavior in Cryptocurrency Markets Amid Market Crashes |
| title_short | Dynamics of Herding Behavior in Cryptocurrency Markets Amid Market Crashes |
| title_sort | dynamics of herding behavior in cryptocurrency markets amid market crashes |
| topic | herding behavior cryptocurrency markets market crashes covid-19 |
| url | https://dergipark.org.tr/en/download/article-file/3102278 |
| work_keys_str_mv | AT muhammedaslamchelerykomath dynamicsofherdingbehaviorincryptocurrencymarketsamidmarketcrashes AT ozlemsayılır dynamicsofherdingbehaviorincryptocurrencymarketsamidmarketcrashes AT bakhtiyargarayev dynamicsofherdingbehaviorincryptocurrencymarketsamidmarketcrashes AT patriceracinedıallo dynamicsofherdingbehaviorincryptocurrencymarketsamidmarketcrashes |