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สถาบันวิจัยเศรษฐกิจป๋วย อึ๊งภากรณ์
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Call for Papers: PIER Research Workshop 2025
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Discussion Paperdp
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19 April 2023 (Updated 15 February 2024)
202316818624000001707955200000
No. 206

Do People Gamble or Invest in the Cryptocurrency Market? Transactional-Level Evidence from Thailand

Abstract

Should cryptocurrencies be viewed as a gambling tool or a risky investment instrument? While their unpredictable returns resemble gambling, recent studies show their prices having a timevarying correlation with traditional risky assets like the S&P 500. Many institutional investors have, thus, included cryptocurrencies in their portfolios for diversification. This paper examines the behavior of cryptocurrency market participants and investigates whether they behave like gamblers or investors. Literature shows that gamblers often engage in loss-chasing behavior, escalating risk-taking after losses that may go on indefinitely. In contrast, investors typically exhibit risk aversion after losses, though some might increase risk-taking after “paper losses,” a phenomenon called the “realization effect.” Our study found high-risk individuals exhibit gambling-like behavior, chasing both realized and paper losses. In contrast, we found limited evidence that low-risk individuals engage in risk aversion and realization effect, similar to investors. These insights are crucial for policymakers, as loss-chasing can lead to the siutation where people taking on more risk than they can afford, potentially resulting in bankruptcy.

Published Version

Nakavachara, V., Ratanabanchuen, R., Saengchote, K., Amonthumniyom, T., Parinyavuttichai, P., & Vinaibodee, P. (2024). Do People Gamble or Invest in the Cryptocurrency Market? Transactional-Level Evidence from Thailand. Journal of Behavioral and Experimental Finance, 100895.

Download full text
JEL: D81G11G41
Tags: cryptocurrencyrealization effectloss-chasingbehavioral finance
The views expressed in this workshop do not necessarily reflect the views of the Puey Ungphakorn Institute for Economic Research or the Bank of Thailand.
Voraprapa Nakavachara
Voraprapa Nakavachara
Chulalongkorn University
Roongkiat Ratanabanchuen
Roongkiat Ratanabanchuen
Chulalongkorn Business School
Kanis Saengchote
Kanis Saengchote
Chulalongkorn University
Thitiphong Amonthumniyom
Thitiphong Amonthumniyom
Securities Exchange and Commission, Thailand
Pongsathon Parinyavuttichai
Pongsathon Parinyavuttichai
The Securities and Exchange Commission, Thailand
Polpatt Vinaibodee
Polpatt Vinaibodee
The Securities and Exchange Commission, Thailand

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