Applying an international CAPM to herding behaviour model for integrated stock markets (original) (raw)
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Herding behavior in integrated financial markets: the case of MILA
Herding behavior in integrated financial markets: the case of MILA, 2023
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This research aims to examine the presence of herding behavior in Indonesia and Singapore stock markets. Using CCK method and daily data of the stock population in both country’s stock markets on the period of 1996-2015, this research finds the evidence of herding behavior in Indonesia and Singapore. Moreover, this research found that herding behavior in Indonesia is stronger than in Singapore. However, this study was unable to find the evidence of whether there are herding spillover from Indonesia stock market to Singapore, vice versa. Type of Paper: Empirical Keyword: Herding Behavior, International Financial Market, Financial Crisis
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Herding behavior in Chinese stock markets: An examination of A and B shares
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This paper examines the dynamic correlation structure between A-share and B-share stock returns based on three different measures of correlation coefficients. Testing the models by employing daily stock-return data for the period from 1996 through 2003, we reach the following empirical conclusions. First, the correlation coefficients between A-share and B-share stock returns are time varying. Second, the dynamic path of the correlation coefficients indicates that the correlation coefficients are significantly correlated with the trend factor. Third, there is a substantial spillover effect from the Asian crisis to Chinese stockreturn dynamic correlations. Fourth, the evidence suggests that the time-varying correlations are significantly associated with excessive trading activity as measured by excessive trading volumes and high-low price differentials. Fifth, the correlation between A-share and B-share markets has increased since the relaxation of the restriction on B-share market investments by domestic investors. yAs a process of operating and developing the Chinese stock markets, issues of Chinese stocks are mainly divided into A shares (SHA and SZA) and B shares (SHB and SZB); both A shares and B shares are listed on the Shanghai Stock Exchange (SHSE) and the Shenzhen Stock Exchange (SZSE) of mainland China. A shares can be purchased and traded by domestic (Chinese) investors only, and values are denominated in their local currency, the renminbi (RMB). Before February 2001, B shares were sold to foreign investors only, but they have been sold to both foreign and domestic investors since then.
Economic Annals-ХХI, 2018
This paper investigates the contagion effect of herding behaviour in the US, China, and ASEAN-5 stock markets by considering the level of market integration. We employed individual stocks and market returns on daily basis data during the global financial crisis (GFC) and the recent tranquil periods. The sample observed consists of stocks having higher liquidity and larger market capitalisation in each of the stock markets. We applied the cross-sectional returns dispersion approach and ordinary least squares to achieve the purpose by involving static correlation. During the GFC period, the empirical result provides evidence on the presence of herding transmission from the dominant stock market to other integrated markets bilaterally. Specifically, herding behaviour in a domestic market was affected by herding activity in integrated foreign markets. By contrast, herding behaviour in a domestic market was not affected by herding in segmented foreign markets. Comparing to the recent tranquil period of 2017-2018, the contagion effect appears on the market only during the crisis period. Therefore, market participants should be more conservative in anticipating the emergence of this phenomenon for integrated markets under market crisis circumstances.
Analysis of Herding Behavior in Moroccan Stock Market
Journal of Economics and Behavioral Studies, 2019
Frontier markets, particularly the Moroccan financial market, are characterized by a narrowness of market, inability to absorb erratic price fluctuations and the low liquidity of securities that encourage investors to herd and imitate those who have all the information about the market. A quantitative research approach was used to analyze the existence of herding n Moroccan stock market. The daily data used in this study concerns the period from 04/01/2010 to 29/12/2017 and contains the daily returns of the MASI and a total of 43 traded stocks. Statistical and econometric methods such as multidimensional scaling and Cross-sectional absolute deviation were used. Subsequently, after the regression models were examined, findings indicated that the first stocks with the highest similarity to the index return are BMCE, BCP, IAM, ATW and CMSR, and the first stocks with the highest dissimilarity are PAP, IBC and SNP, This will have to allow investors to choose profitable alternatives and avoid those that present a possible risk. The results did also show the existence of herding in the Moroccan stock market both upward and downward. This finding was supported by the clear existence of a non-linearity between market performance and CSAD measurement, which confirms the prediction of a nonlinear inversion relationship between CSAD and. This could be due to the low level of transparency that prevails in frontier stock exchanges and reduces the quality of their information environment, which leads investors not to react rationally and to draw information from the transactions of their peers.