Investing during a Fintech Revolution: Ambiguity and return risk in cryptocurrencies

Di Luo, Tapas Mishra, Larisa Yarovaya and Zhuang Zhang

Journal of International Financial Markets, Institutions and Money, 2021, vol. 73, issue C

Abstract: Rationally justifying Bitcoin’s immense price fluctuations has remained a persistent challenge for both investors and researchers in this field. A primary reason is our potential weakness toward robustly quantifying unquantifiable risks or ambiguity in Bitcoin returns. This paper introduces a behavioral channel to argue that the degree of ambiguity aversion is a prominent source of abnormal returns from investment in Bitcoin markets. Using data over a ten-year period, we show that Bitcoin investors exhibit, on average, an increasing aversion to ambiguity. Furthermore, investors are found to earn abnormal returns only when ambiguity is low. Robustness exercises reassure on the validity of our results.

Keywords: Bitcoin; Ambiguity; Abnormal returns (search for similar items in EconPapers)
JEL-codes: C0 G1 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:73:y:2021:i:c:s1042443121000810

DOI: 10.1016/j.intfin.2021.101362

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