Behavioural finance

: was the crypto market significantly impacted by herding behaviour from 2019 to 2024?

Abstract

This study investigates herding behaviour in the cryptocurrency market between January 1, 2019, and January 1, 2024, analysing five major cryptocurrencies and an index. The findings reveal a nuanced relationship: while a weak direct link exists between linear market returns and return dispersion, significant non-linear factors suggest investors in these markets tend to make diverse and autonomous decisions rather than herd. This challenges traditional understandings of investor behaviour in volatile markets like cryptocurrencies, underscoring the importance of considering non-linear factors such as psychological influences, market-specific conditions, and the impact of external events like the COVID-19 pandemic in analysing market dynamics. The findings have important implications for various stakeholders. Policymakers can better design regulations to enhance market stability. Investors can refine their strategies with a better understanding of market dynamics. Additionally, cryptocurrency developers can better judge market sentiment, enabling more informed innovations.

Date of Award	29 Oct 2024
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Mário Ferreira (Supervisor)