Underreaction among cryptocurrency investors refers to the phenomenon in which certain cryptocurrency market players fail to immediately modify their investment strategies or asset valuations in response to new information or events, resulting in delayed or inadequate responses.
Published in Chapter:
Overreaction, Underreaction, and Short-Term Efficient Reaction Evidence for Cryptocurrencies
Copyright: © 2023
|Pages: 25
DOI: 10.4018/978-1-6684-9039-6.ch014
Abstract
This chapter aims to analyze the price efficiency of Bitcoin (BTC), DASH, EOS, Ethereum (ETH), LISK, Litecoin (LTC), Monero, NEO, QUANTUM, RIPPLE, STELLAR, and ZCASH in their weak form between March 1, 2018 and March 1, 2023 and determine whether they experience overreactions. The results show that cryptocurrencies exhibit positive and negative autocorrelations, which can reduce volatility and moderate price fluctuations. The results also show persistence in cryptocurrency returns, suggesting long-term trends or market patterns that individual and institutional investors can exploit. It is essential to recognize that cryptocurrencies are characterized by a high degree of complexity and instability. Investors need to monitor market trends and make the necessary adjustments to their investment strategies to anticipate market changes.