Extrapolative beliefs about Bitcoin returns

【Author】 Petkova, Ralitsa

【Source】FINANCE RESEARCH LETTERS

【影响因子】9.848

【Abstract】Using survey data from Sentix which records whether investors are bullish, bearish, or neutral about the future price of Bitcoin, we examine how investors form expectations about Bitcoin returns. We use a model for expectations with an exponential decay of weights on past returns and find that investors extrapolate from Bitcoin's past returns in a way that puts more weight on more recent returns. Compared to institutional investors, individuals display a higher degree of extrapolation, consistent with the perception that nonprofessionals are more prone to behavioral biases. The extrapolative component of expectations is a significant predictor of Bitcoin returns in the short term, however, its explanatory power is small. Understanding how investors in the cryptocurrency market form their beliefs is important because variation in beliefs could affect Bitcoin price dynamics and potentially lead to excess volatility, momentum, and reversal.

【Keywords】Bitcoin; Cryptocurrency; Extrapolation; Extrapolative beliefs; America

【发表时间】2023 SEP

【收录时间】2023-08-09

【文献类型】实证数据

【主题类别】

区块链治理-市场治理-市场分析