A cross-country analysis of herd behavior in Europe

Abstract

This paper examines country specific herding behavior in European liquid constituent indices for the period of 2001-2012. While we report insignificant results for the whole period, we document significant herding behavior during crises and asymmetric market conditions. Particularly, herding effect is pronounced in most continental countries during the global financial crisis and Nordic countries during the Eurozone crisis. However, PIIGS countries are the victims in both crises. Furthermore, we find evidence that the cross sectional dispersions of returns can be partly explained by the cross sectional dispersions of the other markets, with Germany having the greatest influence on the regional cross-country herding effect. Apprehensions heighten among the regulators, policy makers, and investors in the European markets for the herding behavior during volatile market conditions. JEL Classification: G01, G12, G15

Herding behaviour in a peripheral European stock market: the impact of the subprime and the European sovereign debt crises

“…Chiang and Zheng (2010) find that crises trigger herding behavior in the US and Latin American markets, but do not have a significant effect on this behaviour in other markets. Mobarek et al (2014) finds that during crises herding behavior emerges in several countries (France, Italy, Spain, and Germany) where it was otherwise absent.…”

Herding behaviour in a peripheral European stock market: the impact of the subprime and the European sovereign debt crises

“…Even though this hypothesis was already tested in other papers (Gavriilidis et al, 2013b;Holmes et al, 2013) and some use the same methodology (Economou et al, 2011;Mobarek et al, 2014), in this paper we control for the change in volatility across time and stress the impact of crises.…”

“…This hypothesis stems from the fact that some authors argue that herding can be more pronounced in times of crisis (Kim and Wei, 2002;Chiang and Zheng, 2010;Mobarek et al, 2014). As herding is more intense when there is more volatility and market stress (Gleason et al, 2004;Kim and Wei, 2002), we define the hypothesize that herding may be more prevalent in periods of crisis.…”

“…Our results are relevant for Portugal and other small and very concentrated stock markets that share similarities in market structure, dissemination of information and industry structure. Using market returns and CSAD data, Mobarek et al (2014) find that Portugal belongs to the cluster of PIIGS countries (Portugal, Italy, Ireland, Greece and Spain) that has characteristics distinct from the Nordic and continental countries.…”

An Evaluation of the Factors Influencing Investors' Perception in Bangladesh Stock Market

“…al., 2011); United States (Kumar, 2009;Elan, 2010;Shiller, 2000). Research has also been conducted focusing on the investors of a particular region of the world (Mobarek, Mollah, & Keasey, 2014;Kamstra, Kramer, & Levi, 2003). Besides, a number of studies have been conducted so far on investors in the stock market of Asian region specifically; China (Shumway & Wu, 2006); India (Prosad, 2014;Rakesh, 2014;Bhatt, 2013;Joshi, Khusboo & Desai, 2011;Jains and Dashora, 2012;Mohanta & Debasish, 2011); Japan (Kamesaka, Nofsinger & Kawakita, 2003); Malaysia (Chong & Lai, 2011); Pakistan (Iqbal & Usmani, 2009;Lodhi, 2014); UAE (Al-Tamimi, 2006).…”