Herding behavior in the cryptocurrency market during COVID-19 pandemic: The role of media coverage

Abstract

This paper examines herding behavior in the cryptocurrency market during the COVID-19 pandemic using daily data and based on static and regime-switching models. Furthermore, we investigate whether herding behavior is affected by the coronavirus media coverage. Based on a sample of the top-43 cryptocurrencies in terms of market capitalization between 2013 and 2020, we find significant evidence of herding for the entire sample period only during high volatility state. Moreover, during the COVID-19 crisis, results suggest that investors in the cryptocurrency market follow the consensus. Finally, the impact of coronavirus media coverage is significant on herding among investors, explaining such behavior in the cryptocurrency market during the COVID-19 crisis. Our findings explain herding determinants that may help investors avoid such comportment, mainly during the crisis.