Someone like you: Lottery-like preference and the cross-section of expected returns in the cryptocurrency market

Xiaojuan Zhao, Ye Wang and Weiyi Liu

Journal of International Financial Markets, Institutions and Money, 2024, vol. 91, issue C

Abstract: This study sketches how crypto speculators place their bets and investigates the impact of speculative behavior on cryptocurrency pricing. We conjecture that investors favor comparable alternatives to well-known, successful cryptocurrencies as compensation for missed get-rich-quick opportunities. Our verification begins with developing a composite lottery identification indicator that encapsulates the unique characteristics of cryptocurrencies. Intriguing findings involve the following: A low price effect exists in the cryptocurrency market; small and illiquid cryptocurrencies no longer exhibit superior performance within the most speculative portfolios; investors’ lottery-like preferences are time-varying and differ across cryptocurrencies with different features. Collectively, these findings corroborate our conjecture from various angles.

Keywords: Cryptocurrency; Lottery-like preference; Speculation; Investor psychology; Cross-sectional expected returns (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 G17 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:91:y:2024:i:c:s1042443124000234

DOI: 10.1016/j.intfin.2024.101957

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