Investigating the formation of a coin price bubble using rand numbers: a behavioral economics approach

Abstract

In this study, an attempt has been made to investigate the impact of psychological factors on the fluctuations of coin prices in the market. Psychological factors belong to a category of factors that have given rise to the subfield of behavioral economics. On the other hand, price fluctuations near certain numbers, are an example of market inefiiciency, which contradicts the foundation of classical economic theories. The period under study in this research ranges from 1392 to 1400, including a period of price stability (1392-1396) and a priodof high fluctuations due to international sanctions(1396-1400). The price range during this period has been from 800000 Tomans to 16000000 Tomans.The GARCH (Generalized Autoregressive Conditional Heteroskedasticity) approach is used to estimate the corresponding equation. Here, a 10-day period is considered, and four time intervals around the barriers are examined. To further investigate the hypotheses and the distribution of prices around random numbers, the Nikooyi fitting method is used. The research results confirm the existence of price clustering phenomenon for coins during the period of 1396-1400. The results indicate that the dispersion of numbers in prices is not uniform, and prices show reactions to random numbers. On the other hand, the existence of this psychological phenomenon leads to the creation of a coin bubble or the deviation of coin prices from the equivalent price of 10 grams of gold, which is considered as the real and intrinsic value of the coin. In bullish market conditions, the coin bubble is more significant, but in bearish and stable market conditions, this bubble decreases."

Keywords

• keywords: behavioral economics
• price clustering
• coin bubble