Investors’ fear and herding in the stock market

An Analysis of Herding Behavior in the Stock Market: A Case Study of the Asean-5 and the United States

“…They used a non-linear regression specification to examine the relation between the level of equity return dispersions (as measured by the cross-sectional absolute deviation of returns, i.e., CSAD), and the overall market return. Subsequent studies, such as Chiang and Zheng (2010), Indars and Savin (2017), and Economou et al (2018), examine herding behavior using the cross-sectional dispersion approach based on the seminal work of Christie and Huang (1995) and Chang et al (2000).…”

“…The second strand of literature focuses on cross market herding and herding that can be attributed to other market dynamics due to their implications for international diversification, contagion, and market destabilization (Economou et al, 2018). These studies include, inter alia, Chiang and Zheng (2010), Economou, Kostakis, and Philippas (2011), Chiang et al (2013), Balcilar, Demirer, and Hammoudeh (2013), Mobarek et al (2014), and Economou et al (2015) and find that herding behavior exists across stock markets.…”

“…For instance, Forbes and Rigobon (2002) find that financial markets are somehow interdependent during high volatility periods. The CBOE volatility index (VIX) was introduced in 1993 and expresses the expected future market volatility over the next 30 calendar days, based on the S&P500 options (Economou et al, 2018). A number of studies employ this index (VIX) to test the impact of the US investor sentiment on the US (Philippas et al 2013) or other international stock markets (Chiang et al 2013;Economou et al 2015).…”

Herding Behaviours in Poland and Tanzania

“…Tung,(2018) between the period 2008-2017 observed a significant herding behaviours in the Vietnamese market during the period 2009-2016, while no herding behaviours were observed in 2008 and between 2016-2017. Mixed result were also observed in developed markets for example in the work of Economou et al, (2018) no herding behaviours were observed in the US, UK and Germany markets for the period between January 2004 and July 2014 but for the period between May 25,1988to April,24, 2008 with the exception of the USA, Germany, UK and also Australia showed significant herding behaviours.…”

“…Similarly, Angela-Maria et al,(2015) examined herding behaviours during the global financial markets to the ten country of Central and Eastern Europe CEE which include Bulgaria, Croatia, Czech republic, Estonia, Hungary, Latvia, Lithuania, Slovenia, Poland and Romania. A total of 384 corporation form these countries were examined, herding behaviours were observed in the countries of Croatia, Hungary, Latvia, Lithuania and Slovenia Economou et al, (2018) observed no herding behaviours during the period between January, 2004 to July, 2014 in the countries of USA, UK and Germany. Their previous study Economou et al,(2011) in the country of Greece, Spain, Italy and Portugal during the period between January,1998 to December, 2008 observe herding behaviours in the country of Greece and Italy.…”