Intraday herding on a cross-border exchange

Abstract

This study investigates intraday herding on the Euronext, the world's first cross-border consolidated exchange. Intraday herding is significant in the Euronext as a group and presents us with size, industry and country effects. Importantly, the trading dynamics of the group's member markets significantly affect each other and can, in the case of the Netherlands, promote herding formation. Intraday herding is found to be significant before, during and after the 2007-09 financial crisis period, with its presence appearing the least strong during the crisis. Overall, we demonstrate for the first time in the literature that cross-border exchanges harbour versatile herding dynamics at intraday level, a finding which reflects recent advances in financial technology and the ongoing financial integration in Europe. JEL classification: G02; G15

Herding in Fast Moving Consumer Group Sector: Equity Market Asymmetry and Crisis

“…Our results conform with the findings of Dehghani and Sapian (2014) study where consumer sector stocks were not found to herd. On the other hand, Akbar et al (2019) and Andrikopoulos et al (2017) find significant herding within this industry. The presence of herding impacts the cost of raising new capital in the financial market, thereby impacting the investments and causing asset mispricing.…”

“…Agriculture, food manufacturing, footwear production, and fuel processing also display herd pattern in the Chinese equity markets (Shah, Khan, Meyer, Meyer,& Oláh, 2019). The research on European countries using high frequency sample period data also report herding for sectors such as consumer goods, industrial and utilities, and healthcare (Andrikopoulos, Kallinterakis, Ferreira,& Verousis, 2017). In contrast, the Australian equity market does not engage in herd mentality at the aggregate or industry level (Henker, Henker,& Mitsios, 2006).…”

Does mood affect institutional herding?

“…We then explore whether our results are driven by the size effect, a well-known determinant of institutional herding internationally (Andrikopoulos et al, 2017). To that end, we rank the universe of stocks that our sample funds have invested in each year into five quintiles (Q1 to Q5, with Q1 corresponding to the smallest and Q5 to the largest capitalization stocks) based on those stocks' market capitalization 28 at the end of the immediately preceding year and repeat all estimations from Tables 4-7.…”

Civil unrest and herding behavior: evidence in an emerging market

“…In this context, studies on herding behavior surrounding events such as civil unrest are those that consider times of crisis, such as the subprime crisis and the Asian crisis (Andrikopoulos et al, 2017 andOmay &Iren, 2019, respectively). Andrikopoulos et al (2017) consider a sample of Euronext member countries reporting intraday herding behavior before, during and after the period of said financial crisis (2007-09), with its presence being less prominent during the crisis. Omay and Iren (2019) report herding behavior for Malaysia during the Asian crisis for both foreign and domestic investors.…”

“…In financial markets, one way for investors to overcome periods of crisis is adopting herding behavior (Andrikopoulos et al, 2017;Omay & Iren, 2019). This behavior allows them to imitate the actions of others using the same sources of information and interpreting signals sent to the market in an identical way, and, consequently, making similar financial decisions (Hirshleifer et al, 1994).…”