Performance and learning in an ambiguous environment : A study of cryptocurrency traders

Roland GEMAYEL; Alex PREDA

doi:10.1016/j.irfa.2021.101847

Performance and learning in an ambiguous environment : A study of cryptocurrency traders

Roland GEMAYEL^*, Alex PREDA

^*Corresponding author for this work

Research output: Journal Publications › Journal Article (refereed) › peer-review

8 Citations (Scopus)

Abstract

We investigate the performance and learning ability of traders in an environment governed by ambiguity, such as the cryptocurrency market. Using a profit decomposition methodology, we find significant cross-sectional and temporal heterogeneity in performance. Traders do not learn to progressively increase the magnitude of returns; however, they are able to improve on their ability to realise profits as a mechanism of adaptation to survive through ambiguity. This adaptation increases as traders progress through their career. Moreover, we find evidence in support of the gambler's fallacy. We argue that learning in ambiguous environments has limitations, allowing traders primarily to survive.

Original language	English
Article number	101847
Journal	International Review of Financial Analysis
Volume	77
Early online date	29 Jul 2021
DOIs	https://doi.org/10.1016/j.irfa.2021.101847
Publication status	Published - Oct 2021
Externally published	Yes

Bibliographical note

Funding Information:
This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. We are very grateful to the anonymous referees for their invaluable feedback and constructive suggestions.

Publisher Copyright:
© 2021 The Authors

Keywords

Ambiguity
Cryptocurrencies
Learning
Performance appraisal
Skill
Trading

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10.1016/j.irfa.2021.101847

Cite this

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abstract = "We investigate the performance and learning ability of traders in an environment governed by ambiguity, such as the cryptocurrency market. Using a profit decomposition methodology, we find significant cross-sectional and temporal heterogeneity in performance. Traders do not learn to progressively increase the magnitude of returns; however, they are able to improve on their ability to realise profits as a mechanism of adaptation to survive through ambiguity. This adaptation increases as traders progress through their career. Moreover, we find evidence in support of the gambler's fallacy. We argue that learning in ambiguous environments has limitations, allowing traders primarily to survive.",

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AB - We investigate the performance and learning ability of traders in an environment governed by ambiguity, such as the cryptocurrency market. Using a profit decomposition methodology, we find significant cross-sectional and temporal heterogeneity in performance. Traders do not learn to progressively increase the magnitude of returns; however, they are able to improve on their ability to realise profits as a mechanism of adaptation to survive through ambiguity. This adaptation increases as traders progress through their career. Moreover, we find evidence in support of the gambler's fallacy. We argue that learning in ambiguous environments has limitations, allowing traders primarily to survive.

KW - Ambiguity

KW - Cryptocurrencies

KW - Learning

KW - Performance appraisal

KW - Skill

KW - Trading

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M3 - Journal Article (refereed)

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SN - 1057-5219

VL - 77

JO - International Review of Financial Analysis

JF - International Review of Financial Analysis

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ER -

Performance and learning in an ambiguous environment : A study of cryptocurrency traders

Abstract

Bibliographical note

Keywords

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