Herding where retail investors dominate trading: The case of Saudi Arabia

Testing Sectoral Herding in the Jordanian Stock Market

“…When herding was tested during market falling and rising at market level, results indicated that the behavior was absent during market rising and existed during market falling. This conclusion is not in line with the conclusions of Hammami and Boujelbene (2015) who concluded that herding existed in both market conditions of falling and rising and Rahman, Chowdhury, and Sadique (2015) who found that herding is stronger in the condition of market rising. The presence of herding during sectors rising and falling in the sectors was the same indicating that sector condition of rising and falling does not affect the presence of herding despite the conclusions of some researchers like Tabesh, Kelly, and Poulose (2018) who claimed that herding behavior responds differently in each sector for rising and falling conditions.…”

“…Herding behavior was evidenced in many financial markets in both developing and developed countries including the United States and United Kingdom (Galariotis, Rong & Spyrou, 2015), Australia (Al-Shboul, 2012b), China (Mahmud & Tiniç , 2018), Germany (Kremer & Nautz, 2013), Spain (Andreu, Gargallo, Salvador, & Sarto, 2015), Portugal (Holmes, Kallinterakis & Ferreira, 2013), Turkey (Akinsomi, Coskun & Gupta, 2018), Indonesia (Candraningrat, 2018), Mongolia (Erdenetsogt & Kallinterakis, 2016), Pakistan (Qasim et al, 2019), India (Dutta, Gahan, & Panda, 2016), Romania (Trenca, Pece & Mihut, 2015), South Africa (Nasarudin et al, 2017); Kwait & Qatar (Demir & Solakoglu, 2016), Saudi Arabia (Rahman, Chowdhury & Sadique, 2015), and Tunisia (Hammami & Boujelbene, 2015). These studies reveal that herding is a global phenomenon that drew the attention of many researchers all around the world.…”

“…Many studies, however, claimed that herding is not constant but it's changing over time as reported by Sharma et al (2015) and Curto, Falcã o, and Braga (2017). In addition, the level of herding behavior was found to be changing based on the market conditions of rising and falling (Chiang et al, 2013;Erdenetsogt & Kallinterakis, 2016;Rahman et al, 2015) and before and during the global financial crisis (Al-Shboul, 2012a; BenSaï da, Jlassi & Litimi, 2015). In the Jordanian market, where few studies about herding were conducted, the presence of herding was evidenced by Obaidat (2016), Ramadan (2015), and Nasarudin, Noordin, Law, and Yahya (2017) while no evidence of herding was found by Al-Shboul (2012a) in both conditions of market rising and falling.…”

Does Speculation in the Oil Market Drive Investor Herding in Net Exporting Nations?

“…As mentioned earlier, the main advantage of the return-based herding tests, compared to tests based on investors' holding data, is that these tests allow us to capture the dynamic nature of herding as they employ high frequency data and thus can be used to model the timevariation in the level of herding in the market. In this particular study, we employ a testing methodology originally suggested by Christie and Huang (1995), later improved by Chang et al (2000) and applied to a large number of different markets including U.S. and Asian equities (Chang et al, 2000), exchange traded funds (Gleason et al, 2004), Asian stock markets (Tan et al, 2008;Demirer et al, 2010), global sectors (Chiang and Zheng, 2010), American Depository Receipts (Demirer et al, 2014), Gulf Arab stock markets (Balcilar et al, 2013(Balcilar et al, , 2014Rahman et al, 2015), and the Turkish stock market (Balcilar and Demirer, 2015), among others. However, as mentioned earlier, these tests have largely focused on detecting the presence of herd behavior in these markets without relating the time-variation in herding to potential underlying factors.…”

The impact of free cash flow, equity concentration and agency costs on firm’s profitability

“…In 1984 the government created a Ministerial Committee to develop and regulate the market which led to the formation of the Saudi Stock Exchange (Tadawul) in 2007. A closer look at the stock market data demonstrate that the market still has fewer listings relative to the size of the Saudi economy and the number has grown only slowly over time (Rahman et al, 2015). In Saudi Arabia, the majority of firms listed in the stock exchange are not available for trading.…”