Do investors feedback trade in the Bitcoin - and why?

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Date
2021-09-15
Authors
Karaa, Rabaa
Slim, Skander
Goodell, John W.
Goyal, Abhinav
Kallinterakise, Vasileios
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Routledge - Taylor & Francis Group
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Abstract
We empirically examine whether feedback traders are active in the Bitcoin and the extent to which their presence is affected by a series of noise-related factors (sentiment; volume; liquidity) at three different frequencies (hourly; daily; weekly) for the April 2013–July 2019 period based on Bitstamp data. Our findings suggest that positive feedback trading grows stronger for higher (hourly; daily) frequencies, with its presence manifesting itself mainly during periods of high/improving sentiment and high/rising volume/liquidity. Additional tests reveal that the significance of hourly feedback trading is identified during hours corresponding to the trading hours of major European/North American markets. Overall, our results confirm extant literature evidence on the prevalence of noise trading in cryptocurrencies, while further showcasing that the factors motivating feedback trading in other asset classes (equities; ETFs; futures) exhibit similar effects over the presence of feedback traders in the cryptocurrency market.
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Keywords
Bitcoin , Feedback trading , Liquidity , Sentiment , Volume
Citation
Karaa, R., Slim, S., Goodell, J.W., Goyal, A. and Kallinterakise, V. (2021) 'Do investors feedback trade in the Bitcoin - and why?', European Journal of Finance. doi: 10.1080/1351847X.2021.1973054
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© 2021, Informa UK Limited, trading as Taylor & Francis Group. This is an Accepted Manuscript of an item published by Taylor & Francis in European Journal of Finance on 15 September 2021, available online: https://doi.org/10.1080/1351847X.2021.1973054