According to rational expectation models, uninformed or liquidity trading make market price volatility rise. This paper sets out to analyze the impact of herding, which may be interpreted as one of the components of uninformed trading, on the volatility of the Spanish stock market. Herding is examined at the intraday level, considered the most reliable sampling frequency for detecting this type of investor behavior, and measured using the Patterson and Sharma (2006) herding intensity measure. Different volatility measures (historical, realized and implied) are employed. The results confirm that herding has a direct linear impact on volatility for all of the volatility measures considered although the corresponding intensity is not always the same. In fact, herding variables seem to be useful in volatility forecasting and therefore in decision making when volatility is considered a key factor.
This study explores the relationship between total quality management (TQM) and firm performance taking TQM as an internally consistent system of practices. The study tests the link between the two variables using the universal approach, analyzes whether the most competitive firms are those adopting TQM, and tests for an isomorphic effect on other firms. The study uses a sample of Spanish firms that have received TQM prizes at the national or regional level between 1997 and 2003 and a control sample for comparison. The findings indicate that in the absence of any evidence to confirm the universal hypothesis, TQM pioneers experience performance gains, because of the early implementation of the system; however, late adopters do not experience similar results. Firms using a TQM system are not necessarily better than their counterparts are, before putting the system into action. The study uses panel data that takes into account the unobservable heterogeneity between individuals and the dynamics of firms' financial variables.
This paper analyzes the investor sentiment effect in four key European stock markets: France, Germany, Spain and the UK. The findings show that sentiment has a significant influence on returns, varying in intensity across markets. The variation appears to involve both stock characteristics and crosscountry cultural or institutional differences. The results also show sensitivity to the choice of sentiment proxy.
The aim of this paper is to explore herding behaviour among investors to determine its rational and emotional component factors and identify relationships among them. We apply causality tests to evaluate the impact of return and market sentiment on herding intensity. The herding intensity is quantified using the measure developed by Patterson and Sharma (2006). The research was conducted during the period 1997-2003 in the Spanish stock market, where the presence of herding has been confirmed. The results reveal that the herding intensity depends on past returns and sentiment or subjective assessments and confirm the presence of both a rational and an emotional factor.
This paper studies the effect of investor sentiment on stock returns in three Central European markets: the Czech Republic, Hungary and Poland. The results show that sentiment is a key variable in the prices of stocks traded on these markets and its impact is stronger here than in more developed European markets. This effect is linked to stock characteristics, particularly those considered to make stocks more prone to the influences of investor sentiment. The evidence shows that the effect is not uniform across countries, since higher levels are found for Poland and the Czech Republic, thus confirming the role of country-specific factors in the impact of investor sentiment on stock prices. The results also confirm that sentiment is a twofold (global and local) phenomenon, in which the global dimension has much greater impact than the local dimension, at least in the markets considered. Finally, the paper has shown that sentiment does not spread, at least to any significant degree, through the movement of capital between markets. This strengthens the argument that sentiment is transmitted through a behavioral mechanism. If this argument proves correct, there is little likelihood of local regulatory action being very effective in limiting the perverse impact of asset bubbles.
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