The prevalence of price overreactions in the cryptocurrency market

【Author】 Borgards, Oliver; Czudaj, Robert L.

【Source】JOURNAL OF INTERNATIONAL FINANCIAL MARKETS INSTITUTIONS & MONEY

【影响因子】4.217

【Abstract】This paper examines the prevalence of price overreactions for twelve cryptocurrencies compared to the US stock market. For this purpose, we implement a dynamic modeling approach to define and test for overreactions for interday and various intraday price levels. We find evidence that price overreactions are highly prevalent in the cryptocurrency market for all frequencies, strongly supporting the overreaction hypothesis. This result is largely comparable for cryptocurrency and stock markets despite the fact that both markets are fundamentally different. However, the returns of an overreaction trading strategy are significantly higher for cryptocurrencies due to larger overreactions as the most important factor for profitability. In addition, our results also show that negative overreactions are slightly more prevalent than positive overreactions. (C) 2020 Elsevier B.V. All rights reserved.

【Keywords】Cryptocurrency; Overreaction; Mean reversion; Turning point; Stock market

【发表时间】2020 MAR

【收录时间】2022-01-02

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