Purpose
The purpose of this paper is to investigate herding behavior around the crude oil market and the stock market and the possible cross-herding behavior between the two markets. The analysis examines also the herding behavior during financial turmoil and includes the investor sentiment and market volatility.
Design/methodology/approach
The authors use a modified version of the cross-sectional standard deviation and the cross-sectional absolute deviation to include investor sentiment, financial crisis and market volatility.
Findings
The authors find that the volatility of the stock market reduces the herding behavior around the oil market and boosts that around the stock market. However, the investors’ sentiment reduces the herding around the stock market and boosts that around the crude oil market. Consequently, the authors can conclude that the herding behavior around the two markets moves inversely and the herding in each market is enhanced by the lack of information in the other market.
Research limitations/implications
This paper is limited to the herding of stocks around the crude oil market and ignores the possible herding of commodities around the oil market.
Originality/value
The originality of the paper rests on the study of the possible cross-herding behavior between the oil market and the stock market especially during financial turmoil.
Forecasting crude-oil market volatility: Further evidence with jumps
