Herd Behavior in Crypto Asset Market and Effect of Financial Information on Herd Behavior

TL;DR

This study investigates herd behavior in the crypto-asset market and examines whether financial information, such as interest rate announcements and stock indices, influences this behavior, using empirical models over data from 2014 to 2019.

Contribution

It provides empirical evidence of herd behavior in the crypto market and analyzes the impact of specific financial information on this behavior, which is a novel application in this context.

Findings

Herd behavior was confirmed in the crypto market during the study period.

Interest rate announcements did not significantly influence herd behavior.

Stock market performance also had no effect on herd behavior.

Abstract

The initial purpose of the study is to search whether the market exhibits herd behaviour or not by examining the crypto-asset market in the context of behavioural finance. And the second purpose of the study is to measure whether the financial information stimulates the herd behaviour or not. Within this frame, the announcements of the Federal Open Market Committee (FOMC), Governing Council of European Central Bank (ECB) and Policy Board of Bank of Japan (BOJ) for interest change, and S&P 500, Nikkei 225, FTSE 100 and GOLD SPOT indices data were used. In the study, the analyses were made over 100 cryptocurrencies with the highest trading volume by the use of the 2014:5 - 2019:12 period. For the analysis, the Markov Switching approach, as well as loads of empiric models developed by Chang et al. (2000), were used. According to the results obtained, the presence of herd behaviour in the crypto-asset market was determined in the relevant period. But it was found that interest rate announcements and stock exchange performances had no effect on herd behaviour.