Herd behavior in the French stock market

2017 ◽  
Vol 16 (4) ◽  
pp. 497-515 ◽  
Author(s):  
Houda Litimi
Keyword(s):  
Stock Market ◽  
Trading Volume ◽  
Design Methodology ◽  
Garch Model ◽  
Herd Behavior ◽  
Conditional Volatility ◽  
Herding Behavior ◽  
Absolute Deviation ◽  
Cross Sectional ◽  
Content Type

Purpose This paper aims to investigate the herding behavior in the French stock market and its effect on the idiosyncratic conditional volatility at a sectoral level. Design/methodology/approach This sample covers all the listed companies in the French stock market, classified by sector, over four major crisis periods. The author modifies the cross-sectional absolute deviation (CSAD) model to include trading volume and investors sentiment as herding triggers. Furthermore, the author uses a modified GARCH model to investigate the effect of herding on conditional volatility. Findings Herding is present in the French market during crises, and it is present in only some sectors during the entire period. The main trigger for investors to embark into a collective herding movement differs from one sector to another. Furthermore, herding behavior has an inhibiting effect on market conditional volatility. Originality/value The author modifies the CSAD model to investigate the presence of herding in the French stock market at a sectoral level during turmoil periods. Furthermore, the particularly designed GARCH model provides new insights on the effect of herding and volume turnover on the conditional volatility.

scholarly journals Investor Sentiment and Herding Behavior in the Korean Stock Market

2020 ◽  
Vol 8 (2) ◽  
pp. 34
Author(s):  
Ki-Hong Choi ◽  
Seong-Min Yoon
Keyword(s):  
Stock Market ◽  
Quantile Regression ◽  
Stock Markets ◽  
Trading Volume ◽  
Investor Sentiment ◽  
Herding Behavior ◽  
Absolute Deviation ◽  
Cross Sectional ◽  
Korean Stock Market ◽  
Quantile Regression Method

This paper investigates herding behavior and the connection between herding behavior and investor sentiment. We apply a Cross-Sectional Absolute Deviation (CSAD) approach and the quantile regression method to capture herding behavior in the KOSPI and KOSDAQ stock markets. The analysis results are outlined as follows. First, we find that herding behavior is exhibited during down-market periods in the KOSPI and KOSDAQ stock markets. However, we show that adverse herding behavior occurs in low-trading volume and low-volatility periods. Second, according to the results of the quantile regression, herding behavior is found in the low and high quantiles of the KOSPI and KOSDAQ stock markets. However, adverse herding behavior is also found, which means that investors herd in extreme market conditions. Third, the relationship between investor sentiment and herding behavior is analyzed through regression and quantile regression, and investor sentiment is confirmed to be one of the important factors that can cause herding behavior in the Korean stock market.

scholarly journals Herding behavior and stock market conditions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abdollah Ah Mand ◽  
Hawati Janor ◽  
Ruzita Abdul Rahim ◽  
Tamat Sarmidi
Keyword(s):  
Stock Market ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Developed Countries ◽  
Herding Behavior ◽  
Market Conditions ◽  
Absolute Deviation ◽  
Cross Sectional ◽  
Content Type ◽  
Market Return

Purpose The purpose of this paper is to investigate whether market conditions have an effect on investors’ propensity to herd in an emerging economy’s stock market. Additionally, given the lack of research on Islamic behavioral finance, the authors further investigate if the herding phenomenon is distinct in Islamic versus conventional stocks. Design/methodology/approach The authors used daily data for the period of 1995–2016 according to the herding behavior model of Chang et al. (2000), which relies on cross-sectional absolute deviation of returns. Findings Findings reveal the herding behavior of investors among Shariah-compliant during up and down market exits with non-linear relationship to the market return, while for conventional stocks herding behavior does not exist with linear nor nonlinear relationships during the up and down market. Furthermore, for the whole market, herding behavior only exists during upmarket with a nonlinear relationship to the market return. However, this relationship is not significant. Moreover, the results of this study are robust with respect to the effect of the Asian and global financial crisis. Practical implications The findings are useful for investors to identify which market conditions are associated with rational and irrational behavior of investors. Originality/value Most of the theoretical and empirical studies on herding behavior have focused on developed countries. Only a few studies have paid attention to the herding behavior in Islamic financial markets, particularly in the context of an emerging market such as Malaysia. This study fills this void.

Impact of herding on the returns in the Indian stock market: an empirical study

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sunaina Kanojia ◽  
Deepti Singh ◽  
Ashutosh Goswami
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Market Condition ◽  
Individual Investors ◽  
Herd Behavior ◽  
Market Conditions ◽  
Absolute Deviation ◽  
Cross Sectional ◽  
Content Type ◽  
Indian Stock Market

PurposeHerd behavior has been studied herein and tested based on primary respondents from Indian markets.Design/methodology/approachThe paper expounds the empirical evidence by applying the cross-sectional absolute deviation method and reporting on herd behavior among decision-makers who are engaged in trading in the Indian stock market. Further, the study attempts to analyze the market-wide herding in the Indian stock market using 2230 daily, 470 weekly and 108 monthly observations of Nifty 50 stock returns for a period of nine years from April 1, 2009 to March 31, 2018 during the normal market conditions, extreme market conditions and in both increasing and decreasing market conditions.FindingsIn a span of a decade witnessing different market cycles, the authors’ results exhibit that there is no evidence of herding in any market condition in Indian stock market primarily due to the dominance of institutional investors and secondly because of low market participation by individual investors.Originality/valueThe results reveal that there is no impact of herd behavior on the stock returns in the Indian equity market during the normal market conditions. It highlights that the participation of individuals who are more prone to herding is more evident for short-run investments, contrary to long-term holdings.

scholarly journals Investigative Study of Investor’s Herding Behavior During Bullish and Bearish Market: A Case of Pakistan Stock Exchange

2021 ◽  
Vol 6 (3) ◽  
pp. 17-25
Author(s):  
Muhammad Tayyab Ul Hassan ◽  
Syed Hassan Jamil
Keyword(s):  
Standard Deviation ◽  
Trading Volume ◽  
Stock Exchange ◽  
Emerging Market ◽  
Market Volatility ◽  
Herd Behavior ◽  
Herding Behavior ◽  
Absolute Deviation ◽  
Cross Sectional ◽  
Asymmetric Effects

This study investigates the influence of herd behavior on the Pakistan stock exchange indexes KSE-100 and KSE-30 during bullish and bearish markets. Using the daily market return from 2007 to 2020. We implement the method of main herding measures, Cross-sectional absolute deviation, and Cross-sectional standard deviation, to explore the influence of herd behavior in the emerging market of Pakistan. The results indicate the presence of market-wide herd behavior: (a) along with the different direction of market positive and negative return, (b) when trading volume high, (c) when stock market highly volatile, and (d) during and the post-financial crisis. Moreover, Investors don’t herd when low trading volume and low volatility. Our study fills the gap in the literature and contributes to academic relevance by exploring the influence of herd behavior among both bull and bear periods in markets of Pakistan, it also examines the possible asymmetric effects of herding related to the market with high-low trading volume and market volatility.

Cross-herding behavior between the stock market and the crude oil market during financial distress

2018 ◽  
Vol 44 (4) ◽  
pp. 439-458 ◽  
Author(s):  
Houda BenMabrouk
Keyword(s):  
Stock Market ◽  
Crude Oil ◽  
Investor Sentiment ◽  
Market Volatility ◽  
Herding Behavior ◽  
Absolute Deviation ◽  
Cross Sectional ◽  
Content Type ◽  
Oil Market ◽  
The Cross

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.

Islamic finance and herding behavior: an application to Gulf Islamic stock markets

2018 ◽  
Vol 10 (2) ◽  
pp. 192-206 ◽  
Author(s):  
Imed Medhioub ◽  
Mustapha Chaffai
Keyword(s):  
Saudi Arabia ◽  
Stock Market ◽  
Stock Returns ◽  
Stock Markets ◽  
Future Research ◽  
Herd Behavior ◽  
Herding Behavior ◽  
Cross Sectional ◽  
Monthly Data ◽  
Content Type

Purpose The purpose of this paper is to examine the herding behavior in GCC Islamic stock markets. Design/methodology/approach The authors followed the methodology developed by Chiang and Zheng (2010) to test herding behavior. Cross-sectional tests have been considered in this paper. The authors use both OLS and GARCH estimations to examine herding behavior by using a sample of GCC Islamic stock markets. Findings By applying monthly data for the period between January 2006 and February 2016 for five Islamic GCC stock returns (Bahrain, Kuwait, Qatar, Saudi Arabia and UAE), results suggest a significant evidence of herd behavior in Saudi and Qatari Islamic stock markets only. When the authors take into account the existence of asymmetry in herd behavior between down- and up-market periods, evidence of herding behavior during down market periods in the case of Qatar and Saudi Arabia was found. In addition, the authors found that Kuwaiti and Emirates Islamic stock markets herd with the local conventional stock market, showing the interdependencies between Islamic and conventional markets. Research limitations/implications In this paper, the authors found an absence of herding behavior in some Islamic stock markets (Bahrain, Kuwait and Emirates). This is not the result of Shariah guidelines in these Islamic markets, but this is mainly due to the weak oscillations of returns which are very close to zero. In our future research, the authors could apply daily data and compare the results to those obtained in this paper by using monthly data. Originality/value This paper provides a practical framework in order to analyze the herding behavior concept for GCC Islamic stock markets. Its originality consists of linking the herding behavior to ethics and morality to verify whether the properties and guidelines of Islam are respected in Islamic stock markets. To the best of the authors’ knowledge, no other paper has treated the case of herding behavior in Islamic stock markets and taking into account the possible influence of the conventional market on the Islamic stock market that may impact herding behavior.

The profitability of herding: evidence from Taiwan

2018 ◽  
Vol 44 (7) ◽  
pp. 919-934 ◽  
Author(s):  
Chun-Da Chen ◽  
Riza Demirer
Keyword(s):  
Design Methodology ◽  
State Space Model ◽  
Investment Strategy ◽  
Investment Strategies ◽  
Past Performance ◽  
Absolute Deviation ◽  
Cross Sectional ◽  
Content Type ◽  
Space Model ◽  
High Level

Purpose The purpose of this paper is to show that the level of herding in an industry can be the basis for a profitable investment strategy. Design/methodology/approach The authors apply three different herding measures in the paper, including cross-sectional standard deviation, cross-sectional absolute deviation and non-linear model – state–space model. Findings The authors find that industries that experience a high level of herding yield higher subsequent returns regardless of their past performance. Consequently, the authors show that a herding-based investment strategy generates significant profits, even after adjusting for risk. The findings also show that the herding effect when combined with past performance as part of a conditional investment strategy yields significant profits regardless of the formation and holding periods. The findings suggest that the level of herding could serve as a systematic driver of returns and could be exploited for profitable investment strategies. Originality/value To the best of authors’ knowledge, this is the first study in the literature to show that herding by itself can serve as a determinant of returns regardless of past performance.

Asymmetric effect of oil prices on herding in commodity markets

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mouna Youssef ◽  
Khaled Mokni
Keyword(s):  
Global Financial Crisis ◽  
Commodity Markets ◽  
Oil Price ◽  
Herd Behavior ◽  
Asymmetric Effect ◽  
Herding Behavior ◽  
Absolute Deviation ◽  
Content Type ◽  
Normal Period ◽  
The Impact

PurposeThis study aims to test the presence of herding behavior in commodity markets, including energy, metals and agriculture. Additionally, the authors investigate the possible asymmetric effect of oil price changes on the herding behavior in these markets.Design/methodology/approachThe authors examine herding based on the cross-sectional absolute deviation (CSAD) model in a static and time-varying perspective.FindingsBy using daily data over the period 2003–2017, the authors’ findings firstly support the dynamic nature of investor behavior in commodity markets, which oscillates between antiherding during the normal period and herding during and after the global financial crisis of 2008. Furthermore, results highlight that the asymmetric impact of oil shocks on herding differs across commodity sectors and periods. Additionally, herding seems to be more pronounced when the oil market declines, which may be due to the pessimistic investors' sentiments.Practical implicationsThis study provides insight into what factors influence herd behavior in commodity markets. The understanding of factors driving herding aids investors to avoid the impact of this behavior and its consequencesOriginality/valueTo the authors’ knowledge, this study is the first to examine whether the level of herding depends on the oil price fluctuations, as well as the asymmetric effect of the oil price on herding behavior in commodity markets.

Shifts in Herd Mentality of Investors in Uncertain Market Conditions: New Evidence in the Context of a Frontier Stock Market

2018 ◽  
Vol 10 (3(J)) ◽  
pp. 203-219 ◽  
Author(s):  
Kalugala Vidanalage Aruna Shantha
Keyword(s):  
Stock Market ◽  
Learning Effect ◽  
Stock Exchange ◽  
Psychological Effects ◽  
Herd Behavior ◽  
Absolute Deviation ◽  
Cross Sectional ◽  
Post Market ◽  
And Behavior ◽  
New Evidence

This paper examines the herding phenomenon in the context of a frontier stock market, the Colombo Stock Exchange of Sri Lanka, employing the cross - sectional absolute deviation methodology to daily frequencies of data for the period from April, 2000 to September, 2016. The results show significant changes in magnitude and pattern of herding over different episodes of the market. The herd behavior is strongly presence irrespective of the direction of the market movement in the 2000 - 2008 period, during which investments in the stock market is affected by the country’s political instability resulting from the civil war. The evidence also shows herd behavior during the period of market bubble whereas negative herding in the market crash period. However, it becomes less likely to occur during the period after the market crash. The lower tendency to herd during the post- market crash period supports the Adaptive Market Hypothesis, implying that investors are likely to realize the irrationality of herding and learn to be more rational as a consequence of significant losses experienced during the period of the market crash. Accordingly, these findings suggest that period- specific characteristics of the market and the associated psychological effects to investors such as overconfidence and panics would cause changes to their beliefs and behavior, the experiences of which would subsequently produce learning effect to minimize their irrationality in decision making.

What make investors herd while investing in the Indian stock market? A hybrid approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muskan Sachdeva ◽  
Ritu Lehal ◽  
Sanjay Gupta ◽  
Aashish Garg
Keyword(s):  
Stock Market ◽  
Fuzzy Ahp ◽  
Hybrid Approach ◽  
North India ◽  
Second Phase ◽  
Herd Behavior ◽  
Herding Behavior ◽  
Two Phase ◽  
Content Type ◽  
Indian Stock Market

PurposeIn recent years, significant research has focused on the question of whether severe market periods are accompanied by herding behavior. As herding behavior is a considerable cause of the speculative bubble and leads to stock market deviations from their basic values it is necessary to examine the motivators which led to herding behavior among investors. The paper aims to discuss this issue.Design/methodology/approachIn this study, the authors performed a two-phase analysis to address the research questions of the study. In the first phase, for text analysis NVivo software was used to identify the factors driving herding behavior among Indian stock investors. The analysis of a text was performed using word frequency analysis. While in the second phase, the Fuzzy-AHP analysis techniques were employed to examine the relative importance of all the factors determined and assign priorities to the factors extracted.FindingsResults of the study depicted Investor Cognitive Psychology (ICP), Market Information (MI), Stock Characteristics (SC) as the top-ranked factors driving herding behavior, while Socio-Economic Factors (SEF) emerged as the least important factor driving herding behavior.Research limitations/implicationsThe current study was undertaken among stock investors from North India only. Moreover, numerous factors are not part of the study but might significantly influence the investors' herding behaviors.Practical implicationsComprehending the influences of the different factors discussed in the study would enable stock investors to be more aware of their investment choices and not resort to herd behavior. This research enables decision-makers to understand the reasons for herd activity and helps them act accordingly to improve the stock market's performance.Originality/valueThe current study will provide an inclusive overview of herding behavior motivators among Indian stock investors. This study's results can be extremely useful for both academics and policymakers to gain some insight into the functioning of the Indian stock market.

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