This paper examines the impact of cryptocurrency design features on their return volatility. We compile a sample of 58 cryptocurrencies, adopt the taxonomy of design features proposed by Eska et al. (2022), and estimate LASSO regressions. We document that older cryptocurrencies tend to be less volatile. Networks with mandatory transaction fees, cryptocurrencies based on (delegated) Proof-of-Stake, and those developed by private for-profit entities tend to be more volatile. Furthermore, we provide evidence that networks passing transaction fees and/or tips on to verifiers are associated with higher volatility levels.

This paper analyzes the relationship between investor herding and attention in the decentralized cryptocurrency market with its continuous, around the clock trading and large share of retail investors. Herding behavior is stronger when market returns are positive but is negatively related to both the level and cross-sectional dispersion of investor attention. Moreover, there are pronounced intraday variations: Herding exhibits similar patterns as attention and blockchain activity and is strongest during the overlap of hours when traders in major economic centers are likely awake.

The paper shows that legislative changes that are harmful to local biodiversity significantly impact municipal bond markets and are associated with an increase in municipal bond yields. The paper also finds that certain local factors exacerbate this effect. The analysis is based on a series of statewide regulatory shocks that conservation biologists consider to be detrimental to biodiversity conservation. These regulatory changes result in laws that hinder effective population management of unowned cats—a well-known invasive species that contributes to biodiversity loss. The study employs a state-border discontinuity approach, comparing municipal bond yields issued by counties affected by these statewide laws to those issued by nearby counties not subject to such laws. This is the first paper to examine biodiversity-related regulatory shocks within finance. In doing so, it underscores the economic significance of biodiversity-related legislative measures and advances finance research that incorporates biodiversity.

We document one form of political rent-seeking at Chinese state-owned (SOE) brokerages, where the managers and board members hire analysts connected with securities regulators to receive promotions. Using textual measures for analyst performance and kinship scores based on facial similarity, we find that politically connected analysts have lower research quality compared with merit-based hires, which affects investor returns negatively but brokerage officials’ promotional prospects positively. China’s anti-corruption campaign reduces the cronyism and improves analysts’ research quality. Instead of mitigating rent extraction through internal party oversight, regulators in autocracies may share political rents with SOE officials.

We analyze whether the design of cryptocurrencies helps to explain the huge cross-sectional variation in the market values of cryptocurrencies. We propose a taxonomy of design features and hand-collect data on these features for a sample of 79 cryptocurrencies. Using a two-stage regression approach and LASSO regressions, we find, inter alia, that forks and deviations from the design of Bitcoin are associated with lower valuation. In contrast, non-anonymous cryptocurrencies and cryptocurrencies that do not pass on any transaction fees and/or tips to agents who maintain the integrity of the network have, on average, higher market values. These results are robust to variations in the way we measure market valuation. 

Electricity constitutes one of the main input factor for miners of proof-of-work networks like Bitcoin, so they gravitate towards countries with cheap energy. We analyze risks associated with this geographical centralization by exploiting an exogenous shock to the electricity supply in a relatively small region with heavy Bitcoin mining activity. We first document a drop of about 24% in the total computing power of the Bitcoin network during a blackout that lasts several days. Compared to a control group consisting of a proof-of-stake cryptocurrency, we find evidence of blockchain congestion as fees increase substantially while the number and value of transactions decrease. The increased settlement latency on the blockchain also reduces secondary market quality as seen in higher exchange rate volatility, lower liquidity, and larger price differences between exchanges. Overall, our results suggest that geographical centralization poses system-wide risks to proof-of-work cryptocurrencies.