Herding Behavior and Liquidity in the Cryptocurrency Market

Sonia Arsi (), Khaled Guesmi () and Elie Bouri
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Sonia Arsi: Carthage Business School, University Tunis Carthage, Tunisia
Khaled Guesmi: Center of Research for Energy and Climate Change, Paris School of Business, France
Elie Bouri: Adnan Kassar School of Business, Lebanese American University, Lebanon

Asia-Pacific Journal of Operational Research (APJOR), 2022, vol. 39, issue 04, 1-21

Abstract: In view of explosive trends and excessive trades in the cryptocurrency markets, this paper contributes to the existing literature by bringing in the limelight the effect of liquidity on the herding behavior in the cryptocurrency market. Results from a first applied herding model including contemporaneous and lagged squared market returns demonstrated that market-wide herding exists within falling markets. The incorporation of liquidity highlights further evidences on herding behavior across cryptocurrencies during high and low liquid days, which varies across percentiles. Our findings bring handy implications for topics of portfolio and risk management, as well as regulation.

Keywords: Cryptocurrencies; herding behavior; liquidity; Bitcoin (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1142/S0217595921400212

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