Anti-Herding by Hedge Funds, Idiosyncratic Volatility and Expected Returns

Ali, Sara; Badshah, Ihsan; Demirer, Rıza

doi:10.2139/ssrn.4010287

Cited by 1 publication

(1 citation statement)

References 51 publications

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“…A large amount of the scientific research to date is concerned with the detection of the return dispersion-based herding test (Ali et al 2022;Bouri et al 2021;Papadamou et al 2021;Batmunkh et al 2020;Luu and Luong 2020;Arjoon and Bhatnagar 2017;Chen 2013). Notwithstanding the large number of studies, the purpose of this study was to investigate whether the occurrence of a pandemic triggered herd behavior in developed markets, emerging markets, and frontier markets in Europe.…”

Section: Testing Herdingmentioning

confidence: 99%

Herding Behavior in Developed, Emerging, and Frontier European Stock Markets during COVID-19 Pandemic

Bogdan

Suštar

Draženović

2022

JRFM

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The behavior of market participants often does not rely on market signals, but replicates the investment decisions of other parties. The convergence of their investment behavior leads to the emergence of herd behavior with negative implications for financial stability. Moreover, this phenomenon may be even more pronounced in times of crisis. Although herding is an interesting topic which invites the interest of academic researchers, it still has not been sufficiently studied in terms of comparing the herd effect between differently developed stock markets. The first objective of this research was to determine the herd behavior during the COVID-19 pandemic using static and rolling regression analysis. The second objective was to investigate whether the herd behavior was triggered by the pandemic, while the third objective was to compare the differences in herd behavior between differently developed European stock markets. The results show that this phenomenon is most pronounced in emerging markets, followed by frontier markets and developed markets. Therefore, the results of this study are of particular importance for individual and institutional investors to achieve efficient risk diversification and for financial authorities to establish rules and avoid an increase in herd behavior.

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