Margin Trading and Cryptocurrency Investment Among U.S. Investors: Evidence from the National Financial Capability Study

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

Feedback for the authors

Thank you very much for your contributions and efforts in preparing and submitting this manuscript.
The research study examines the association between margin trading behavior (including both margin loans and margin calls) and cryptocurrency investment. It is well structured and presents clear research questions and objectives. The methodology corresponds directly to the research questions and is based on data collected from the 2018 and 2021 NFCS surveys. The analysis demonstrates this alignment. The use of probit models addresses the binary nature of the dependent variable, and the findings are interpreted coherently within the framework of behavioral finance theory. The limitations are well acknowledged, and the discussion follows logically from the study’s objectives.

While the paper is of quality and close to publishable form, I recommend one minor but critical clarification. Although the authors already acknowledge the limitations of cross-sectional data, they should explicitly state that the findings reflect correlation between margin trading behavior (including both margin loans and margin calls) and cryptocurrency investment rather than causation between them and briefly explain this point to ensure clarity for readers and prevent any potential misinterpretation of the results. The cross-sectional nature of the data lacks the critical characteristics needed to support a causal relationship between margin trading behavior and cryptocurrency investment. I understand that, in this context, establishing a causal relationship between these two variables is difficult because controlling other factors like financial literacy, risk tolerance, etc., is very difficult, if not impossible. So, in order to prevent readers from misinterpreting that one is the cause of the other, such as margin trading behavior being a cause of cryptocurrency investment or vice versa, this point needs to be clearly addressed in the limitations section.

Additionally, I recommend adding a brief statement to the abstract indicating that the findings are correlational rather than causal. Since many readers rely on abstracts to evaluate a study’s relevance, a simple phrase like “findings should be interpreted as correlational” would add value to the paper.

Author Response

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Author Response File: Author Response.docx

Reviewer 2 Report

Comments and Suggestions for Authors

Dear Author(s),

The manuscript addresses a timely and relevant topic. However, substantial revisions are necessary, particularly in the introduction, literature review, and methodology sections. Enhancing these areas will improve the overall clarity, coherence, and academic contribution of the paper. Detailed comments have been provided to support the revision process.

 

Comments:

1- Title and abstract:

• As noted in the data section, "The NFCS provides information on Americans' financial capability," indicating that the study focuses on the U.S. population. To ensure clarity for readers, the geographic scope of the study should be explicitly stated in the abstract. Furthermore, if feasible, this scope should also be reflected in the paper’s title to clearly communicate the study’s context and enhance its relevance.

 

2- Introduction section:

• The abbreviation "FINRA" is used throughout the paper but is not defined at its first mention in line 58. The full term should be provided initially for clarity.

3- Literature review section:

• The reviewed literature is not adequate. To improve the structure and clarity of your discussion on factors influencing cryptocurrency investment, it is strongly recommended to organize the literature and identified variables into logical thematic categories—such as economic conditions, technological readiness, regulatory environment, investor behavior, sociocultural aspects, and geopolitical context. This classification will provide a clearer framework for analysis and help readers better understand the complex and multidimensional nature of cryptocurrency investment decisions.
• More importantly, the author(s) should clearly explain how their study differs from existing research and why it is necessary to conduct it. As stated in line 101, "The relationship between margin loans and asset volatility has been explored in previous studies," this claim should be further developed by specifying how the current study adds to or departs from the existing literature. Additionally, in lines 108–109, the statement "Despite being classified as a highly risky financial asset, there has not been much research on the association between margin lending and cryptocurrency investment" implies that some studies have examined this relationship. Therefore, it is important to review those studies and justify the unique contribution of the current research in comparison. This critical aspect is currently missing and represents a major weakness in the paper.
• The fourth paragraph in the Literature Review section, which begins at line 90 and ends at line 100, does not include any references to support the information provided. Citing credible sources is essential—not only to meet academic standards but also to ensure the accuracy of the content and to enhance readers’ confidence in the validity of the discussion. Supporting claims with evidence strengthens the overall quality and reliability of the literature review.
• In line 115, it is mentioned that, "This study uses margin loan usage as a proxy for risky investor behavior to…". The author(s) should explain why margin loans were selected instead of all loans. Although this is briefly mentioned in the introduction, it would be preferable to highlight and clearly justify the choice of margin loans as a proxy within the research method section. Doing so would strengthen the rationale for the selected variables.

4- Theoretical framework section:

• Regarding section 3.1 Hypotheses, it is unclear whether there is a single hypothesis or multiple hypotheses in the study, as suggested by the section title. It would be better to clearly state the hypothesis or hypotheses at the end of the paragraph, using labels such as H1, H2, etc., to enhance clarity and organization.

5- Methodology section:

• More detailed information about the use of the National Financial Capability Study (NFCS) Investor Survey is needed. The data source should be clearly defined and adequately described to ensure clarity for readers, particularly those unfamiliar with the NFCS.
• The author(s) need to clarify the rationale for selecting the 2018–2021 wave in particular and explain why more recent data—if accessible—were not utilized. Providing this explanation is important to support the study’s relevance and the timeliness of the data.
• Moreover, since the selected period includes the COVID-19 pandemic, it is essential to address why the potential impact of the pandemic on cryptocurrency investment was not controlled for, as it could significantly influence the study’s findings—as demonstrated in many related studies.
• The study includes Ethnicity as a control variable, yet no explanation is provided for its relevance. The authors are encouraged to briefly justify why Ethnicity is included in the model.

6- Last section:

• The paper should include a clearly labeled Conclusion section, as this is a common and expected component in academic papers.

 

All the best

Author Response

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Author Response File: Author Response.docx

Round 2

Reviewer 2 Report

Comments and Suggestions for Authors

Dear Author(s),

Thank you for your response to the Round 1 comments. The revisions have been addressed constructively and have enhanced the manuscript compared to the original submission. However, a few minor corrections remain, as detailed in the following comments.

1- It is recommended to add a brief introductory paragraph after the title of Section 2: Literature Review to outline its scope. Currently, the section moves directly to the first subheading (2.1 Economic and Market Factors) without context, creating a gap that may affect coherence. A short overview would help orient the reader and clarify the review’s focus.

2- The authors provided a justification for including ethnicity as a control variable in lines 290–292. However, this rationale would be strengthened by supporting it with evidence from existing literature.

3- It is suggested to create a new table presenting the study’s main variables along with their definitions. If incorporating it into the main tables disrupts the numbering or flow, it can be added as an appendix instead.

4- In the table data—for example, in the first row of Table 1, which includes values such as 0.134452 and 0.0049106—some numbers are presented with six or seven decimal places, while in other tables, such as Table 2, values are rounded to four decimal places. It is recommended to standardize the number of decimal places across all tables to ensure consistency and clarity.

5- My final comment relates to a statistical concern. Given the relatively large number of potentially correlated independent variables included in the Probit models, the issue of multicollinearity may arise. Have the authors tested for multicollinearity? If so, it would strengthen the robustness of the analysis to report the diagnostic methods used (such as a correlation matrix or Variance Inflation Factor) and summarize the findings to ensure the reliability and stability of the estimated coefficients.

All the best

Author Response

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Author Response File: Author Response.docx