An original research of Duke University's DAREC (Digital Asset Research & Engineering Collaborative) published on Economics Letters
The analysis of daily frequency cryptocurrency data reveals a negative asymmetric effect on daily cryptocurrency returns.
By analyzing a large cross-section of cryptocurrencies, we document the absence of the leverage effect in this market. Unlike the equity market, investors exhibit less panicking behavior and appear indifferent to negative returns in terms of market participation. Moreover, the negative asymmetric effect is reverted for some cryptocurrencies in our dataset, showing the investors’ fear of missing out. Our results are robust over different leverage effect models and historical time windows.
• Our analysis reveals a negative asymmetric effect on daily cryptocurrency returns.
• A comparable cross-section of stocks exhibits a more significant leverage effect.
• Cryptocurrency investors exhibit less panicking behavior due to the FOMO effect.
• The analysis is robust in the leverage models and the time windows considered.