Can salience theory explain investor behaviour? Real-world evidence from the cryptocurrency market

【Author】 Chen, Rongxin; Lepori, Gabriele M.; Tai, Chung -Ching; Sung, Ming -Chien

【Source】INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS

【影响因子】8.235

【Abstract】Research on human attention indicates that objects that stand out from their surroundings, i.e., salient objects, attract the attention of our sensory channels and receive undue weighting in the decision-making process. In the financial realm, salience theory predicts that individuals will find assets with salient upsides (downsides) appealing (unappealing). We investigate whether this theory can explain investor behaviour in the crypto-currency market. Consistent with the theory's predictions, using a sample of 1738 cryptocurrencies, we find that cryptocurrencies that are more (less) attractive to "salient thinkers" earn lower (higher) future returns, which indicates that they tend to be overpriced (underpriced). On average, a one cross-sectional standard-deviation increase in the salience theory value of a cryptocurrency reduces its next-week return by 0.41%. However, the salience effect is confined to the micro-cap segment of the market, and its size is moderated by limits to arbitrage.

【Keywords】Salience theory; Cryptocurrency; Cross-section of returns; Behavioural biases; Limits to arbitrage

【发表时间】2022 NOV

【收录时间】2022-11-17

【文献类型】实证数据

【主题类别】

区块链应用-虚拟经济-数字经济