Antoinette Schoar (MIT): Are Cryptos Different? Evidence from Retail Trading

Presenter: Antoinette Schoar (MIT)

Discussant: Aleh Tsyvinski (Yale University)

Zoom webinar link: https://stanford.zoom.us/j/98024063030?pwd=NEFiM2crNmhGbjE1UW4yYSsra2kw…

Webinar ID: 980 2406 3030, Passcode: 889224

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Are Cryptos Different? Evidence from Retail Trading

Authors: Shimon Kogan (Reichman University and Wharton), Igor Makarov (LSE), Marina Niessner (Wharton) and Antoinette Schoar (MIT)

Abstract: Trading in cryptocurrencies has grown rapidly over the last decade, primarily dominated by retail investors. Using a dataset of 200,000 retail traders from eToro, we show that they have a different model of the underlying price dynamics in cryptocurrencies relative to other assets. Retail traders in our sample are contrarian in stocks and gold, yet the same traders follow a momentum-like strategy in cryptocurrencies. Individual characteristics do not explain the differences in how people trade cryptocurrencies versus stocks, suggesting that our results are orthogonal to differences in investor composition or clientele effects. Furthermore, our findings are not explained by inattention, differences in fees, or preference for lotterylike stocks. We conjecture that retail investors hold a model of cryptocurrency prices, where price changes imply a change in the likelihood of future widespread adoption, which in turn pushes asset prices further in the same direction.

Bio of speaker: Antoinette Schoar is the Stewart C. Myers-Horn Family Professor of Finance, MIT Sloan School of Management. Her research interests span from entrepreneurial finance to fintech, consumer finance, and financial intermediation. Some of her ongoing projects investigate competition in credit card markets, applications of behavioral economics to consumer finance and cryptocurrency trading, governance of proof of stake and proof of work blockchains, and decentralized finance (DeFi). She has received several awards including the Kauffman Prize Medal for Distinguished Research in Entrepreneurship and the Brattle Prize for best paper in The Journal of Finance. She is the executive editor of the Journal of Finance, the cochair of the NBER Corporate Finance group, and a cofounder of ideas42, a non-profit that uses insights from behavioral economics and psychology to solve social problems. She holds a PhD in Economics from the University of Chicago and an undergraduate degree from Germany.

Bio of discussant: Aleh Tsyvinski is a Professor of Economics at the Department of Economics at Yale University, and Co-Director of the Macroeconomic Research Program at the Cowles Foundation. He is also a Research Associate at the National Bureau of Economic Research. Previously, he taught at Harvard and UCLA. He has been recognized by the World Economic Forum (Davos) as a Young Global Leader (2009). His research mostly focuses on studying dynamic optimal taxation and social insurance policies. He is broadly interested in how to design social insurance mechanisms that find a balance between redistribution and incentives, especially, in dynamic settings. He has also worked extensively on issues of political economy and information aggregation.