FEEDBACK TRADING EFFECT IN CRYPTOCURRENCIES WITH HIGH FREQUENCY DATA
DOI:
https://doi.org/10.18028/rgfc.v9i1.6053Keywords:
Cryptocurrencies; Feedback Trading; VAR Model.Abstract
This study aimed to evaluate the feedback trading effect in cryptoassets Bitcoin, Ethereum, Litecoin and Dash, using a vector autoregressive system as proposed by Hasbrouck (1991). This effect seeks to evaluate the use of past data to make future decisions, using high frequency data, divided into four periods (day, hour, minute and second) in order to analyse the Feedback trading in cryptocurrencies and it intends to collaborate for the subfield of Behavioral finance, once there are few studies evaluating the investment in digital market under a behavioral perspective. The result suggest that there is a negative feedback trading effect in all cryptocurrencies for models using data aggregated by second and minute. The results also indicates that for Litecoin and Dash there is a negative feedback trading effect for data aggregated by hour.
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References
ANTONIOU, A.; KOUTMOS, G.; PERICLI, A. Index futures and postive feedback trading: Evidence from major stock exchanges. Journal of Empirical Finance, v. 12, n. 2, p. 219-238, 2005.
BOHL, M. T.; REITZ, S. The influence of positive feedback trading on return autocorrelation: Evidence for the German stock market. In GEBERL, S. (Eds.), Aktuelle Entwicklungen im Finanzdienstleistungsbereich, p. 221-233, 2004.
BOHL, M. T.; KLEIN, A. C.; SIKLOS, P. L. Short-selling bans and institutional investors' herding behaviour: Evidence from the global financial crisis. International Review of Financial Analysis, v. 33, n. 1, p. 262-269, 2014.
BOLLERSLEV, T. Generalized autoregressive conditional heteroskedasticity. Journal of Econometrics, v. 31, n. 3, p. 307– 327, 1986.
BOUOIYOUR, J.; SELMI, R.; TIWARI, A. K.; OLAYENI, O. R. What drives Bitcoin price. Economics Bulletin, v. 36, n. 2, p. 843-850, 2016.
BUCHHOLZ, M.; DELANEY, J.; WARREN, J.; PARKER, J. Bits and bets, information, price volatility, and demand for Bitcoin. Economics, v. 1, n. 312, p. 1-48, 2012.
CHANG, C. L.; KE, Y. P. Testing price pressure, information, feedback trading, and smoothing effects for energy exchange traded funds. Annals of Financial Economics, v. 9, n. 2, 1440006, 2014.
CHAU, F.; DEESOMSAK, R.; LAU, M. C. Investor sentiment and feedback trading: Evidence from the exchange-traded fund markets. International Review of Financial Analysis, v. 20, n. 5, p. 292-305, 2011.
CHAU, F.; KUO, J. M.; SHI, Y. Arbitrage opportunities and feedback trading in emissions and energy markets. Journal of International Financial Markets, Institutions and Money, v. 36, n. 1, p. 130-147, 2015.
COHEN, B. H.; SHIN, H. S. Positive feedback trading under stress: Evidence from the US Treasury securities market. [BIS working paper number 122]. Washington, DC: Meetings, 2013.
CUTLER, D. M.; POTERBA, J. M.; SUMMERS, L. H. Speculative dynamics and the role of feedback traders. The American Economic Review, v. 80, n. 2, p. 63– 68, 1990.
DANIELSSON, J.; LOVE, R. Feedback trading. International Journal of Finance & Economics, v. 11, n. 1, p. 35-53, 2006.
GALLO, E. R. S. Economia Comportamental aplicada a Finanças e o Modelo de Agentes: um estudo sobre a presença da subjetividade humana na tomada de decisão e suas implicações no mercado acionário. Dissertação (Mestrado em Economia). Universidade Estadual Paulista (UNESP), São Paulo, 2016.
HASBROUCK, J. Measuring the information content of stock trades. The Journal of Finance, v. 46, n. 1, p. 179-207, 1991.
KAHNEMAN, D.; TVERSKY, A. Prospect Theory: An Analysis of Decision under Risk. Econometrica, v. 47, n. 2, p. 263-292, 1979.
__________ The Framing of Decisions and the Psychology of Choice. Science, v. 211, n. 4481, p. 453-458, 1981.
__________ A., Rational Choice and the Framing of Decisions. The Journal of Business, v. 59, n. 4, p. 51-78, 1986.
LEASE, R. C.; LEWELLEN W. G.; SCHLARBAUM G. G. The Individual Investor: Attributes and Attitudes. The Journal of Finance, v. 29, n. 2, p. 413-433, 1974.
MUTH, J. F. Rational Expectations and the Theory of Price Movements. Econometrica, v. 29, n. 3, p. 315-335, 1961.
PAVEL, C.; MIROSLAVA, R.; D’ARTIS, K. The economics of BitCoin price formation. Applied Economics, v. 48, n. 19, p. 1799-1815, 2015.
SENTANA, E.; WADHWANI, S. Feedback traders and stock return autocorrelations: evidence from a century of daily data. The Economic Journal, v. 102, n. 411, p. 415-425, 1992.
SHILLER, R. J. Speculative prices and popular models. Journal of Economic Perspectives, v. 4, n. 2, p. 55-65, 1990.
SILVA, P.V.J.G. Ensaios sobre Moedas Digitais: Um Estudo sobre Volatilidade e Fenômenos Comportamentais. Tese (Doutorado em Administração de Empresas). Pontifícia Umiversidade Católica do Rio de Janeiro, Rio de Janeiro, 200 f., 2020.
SILVA, P.V.J.G.; SANTOS, J. B.; PEREIRA, G. P. Behavioral Finance in Brazil: A Bibliometric Study from 2007 to 2017. Latin American Business Review, v. 20, n. 1, p. 61-82, 2019.
SIMON, H. A. A Behavioral Model of Rational Choice. The Quarterly Journal of Economics, v. 69, n. 1, p. 99-118, 1955.
VAN WIJK, D. What can be expected from the BitCoin. [Working paper number 345986]. Rotterdam: Erasmus Universiteit, 2013.
WEINTRAUB, R. E., On Speculative Prices and Random Walks A Denial. Journal of Finance, v. 18, n. 1, p. 59-66, 1963ANTONIOU, A.; KOUTMOS, G.; PERICLI, A. Index futures and postive feedback trading: Evidence from major stock exchanges. Journal of Empirical Finance, v. 12, n. 2, p. 219-238, 2005.
BOHL, M. T.; REITZ, S. The influence of positive feedback trading on return autocorrelation: Evidence for the German stock market. In GEBERL, S. (Eds.), Aktuelle Entwicklungen im Finanzdienstleistungsbereich, p. 221-233, 2004.
BOHL, M. T.; KLEIN, A. C.; SIKLOS, P. L. Short-selling bans and institutional investors' herding behaviour: Evidence from the global financial crisis. International Review of Financial Analysis, v. 33, n. 1, p. 262-269, 2014.
BOLLERSLEV, T. Generalized autoregressive conditional heteroskedasticity. Journal of Econometrics, v. 31, n. 3, p. 307– 327, 1986.
BOUOIYOUR, J.; SELMI, R.; TIWARI, A. K.; OLAYENI, O. R. What drives Bitcoin price. Economics Bulletin, v. 36, n. 2, p. 843-850, 2016.
BUCHHOLZ, M.; DELANEY, J.; WARREN, J.; PARKER, J. Bits and bets, information, price volatility, and demand for Bitcoin. Economics, v. 1, n. 312, p. 1-48, 2012.
CHANG, C. L.; KE, Y. P. Testing price pressure, information, feedback trading, and smoothing effects for energy exchange traded funds. Annals of Financial Economics, v. 9, n. 2, 1440006, 2014.
CHAU, F.; DEESOMSAK, R.; LAU, M. C. Investor sentiment and feedback trading: Evidence from the exchange-traded fund markets. International Review of Financial Analysis, v. 20, n. 5, p. 292-305, 2011.
CHAU, F.; KUO, J. M.; SHI, Y. Arbitrage opportunities and feedback trading in emissions and energy markets. Journal of International Financial Markets, Institutions and Money, v. 36, n. 1, p. 130-147, 2015.
COHEN, B. H.; SHIN, H. S. Positive feedback trading under stress: Evidence from the US Treasury securities market. [BIS working paper number 122]. Washington, DC: Meetings, 2013.
CUTLER, D. M.; POTERBA, J. M.; SUMMERS, L. H. Speculative dynamics and the role of feedback traders. The American Economic Review, v. 80, n. 2, p. 63– 68, 1990.
DANIELSSON, J.; LOVE, R. Feedback trading. International Journal of Finance & Economics, v. 11, n. 1, p. 35-53, 2006.
GALLO, E. R. S. Economia Comportamental aplicada a Finanças e o Modelo de Agentes: um estudo sobre a presença da subjetividade humana na tomada de decisão e suas implicações no mercado acionário. Dissertação (Mestrado em Economia). Universidade Estadual Paulista (UNESP), São Paulo, 2016.
HASBROUCK, J. Measuring the information content of stock trades. The Journal of Finance, v. 46, n. 1, p. 179-207, 1991.
KAHNEMAN, D.; TVERSKY, A. Prospect Theory: An Analysis of Decision under Risk. Econometrica, v. 47, n. 2, p. 263-292, 1979.
______. The Framing of Decisions and the Psychology of Choice. Science, v. 211, n. 4481, p. 453-458, 1981.
______. A., Rational Choice and the Framing of Decisions. The Journal of Business, v. 59, n. 4, p. 51-78, 1986.
LEASE, R. C.; LEWELLEN W. G.; SCHLARBAUM G. G. The Individual Investor: Attributes and Attitudes. The Journal of Finance, v. 29, n. 2, p. 413-433, 1974.
MUTH, J. F. Rational Expectations and the Theory of Price Movements. Econometrica, v. 29, n. 3, p. 315-335, 1961.
PAVEL, C.; MIROSLAVA, R.; D’ARTIS, K. The economics of BitCoin price formation. Applied Economics, v. 48, n. 19, p. 1799-1815, 2015.
SENTANA, E.; WADHWANI, S. Feedback traders and stock return autocorrelations: evidence from a century of daily data. The Economic Journal, v. 102, n. 411, p. 415-425, 1992.
SHILLER, R. J. Speculative prices and popular models. Journal of Economic Perspectives, v. 4, n. 2, p. 55-65, 1990.
SILVA, P.V.J.G. Ensaios sobre Moedas Digitais: Um Estudo sobre Volatilidade e Fenômenos Comportamentais. Tese (Doutorado em Administração de Empresas). Pontifícia Umiversidade Católica do Rio de Janeiro, Rio de Janeiro, 200 f., 2020.
SILVA, P.V.J.G.; SANTOS, J. B.; PEREIRA, G. P. Behavioral Finance in Brazil: A Bibliometric Study from 2007 to 2017. Latin American Business Review, v. 20, n. 1, p. 61-82, 2019.
SIMON, H. A. A Behavioral Model of Rational Choice. The Quarterly Journal of Economics, v. 69, n. 1, p. 99-118, 1955.
VAN WIJK, D. What can be expected from the BitCoin. [Working paper number 345986]. Rotterdam: Erasmus Universiteit, 2013.
WEINTRAUB, R. E., On Speculative Prices and Random Walks A Denial. Journal of Finance, v. 18, n. 1, p. 59-66, 1963.
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