Herd Behavior in International Market
According to literature, herding can be observed not only within single stock market, but also on international level. Poland has entrance to Euro Zone in perspective, so especially interesting is answer to the question whether herding is present on the stock markets of candidate countries to Euro Zone? Moreover, whether this tendency will be more noticeable in periods of higher volatility than during the periods of relative market stability, as suggested by psychological theories. To find the measure of herd tendency we can refer both to neoclassical and behavioral theories. Basing on models grounded in rationality assumption, there is a need to assume informative efficiency of markets. Thus, it can be expected that aggregated changes in stock markets should be reflected in the process of prices formation. Behavioral literature pointed that if tendency of herding is present on international level, it can be assumed that markets 'in average' will behave in the similar way. Following this idea the size of deviation of the given series from the 'average' can be taken as the measure of herding activity in aggregated market. Methodology created by Christie, Huang and Chang, Cheng, Khoran will be used as a starting point for the consideration of this problem. To propose more perfect measure of herding, in the paper this approach will be developed by using alternative methodology for average and measure of deviations construction. Those improvements will cause that, theoretical models will come closer to reality and will take into account both sociological and behavioral tendencies present in investors activity. (original abstract)
- Blasco N., Ferreruela S. (2008) Testing Intentional Herding in Familiar Stocks: An Experiment in an International Context, The Journal of Behavioral Finance.
- Boyer B.H., Kumagai T., Yuan K. (2006) How Do Crises Spread? Evidence from Accessible and Inaccessible Stock Indices, The Journal of Finance, Vol. 61(2).
- Brown N.C., Wei K.D., Wermers R. (2012) Analyst Recommendations, Mutual Fund Herding, and Overreaction in Stock Prices, Working paper, University of Maryland.
- Chang E.C., Cheng J.W., Khoran A. (2000) An examination of herd behavior in equity markets: An international perspective, Journal of Banking and Finance, Vol. 24.
- Christie W.G., Huang R.D. (1995) Following the pied piper: Do individual returns herd around the market?, Financial Analyst Journal, Vol. 51 (4).
- Chiang T.C., Zheng D. (2010) An empirical analysis of herd behavior in global stock markets, Journal of Banking and Finance, Vol. 34(8).
- Demirer R., Gubo G., Kutan A.M., (2007) An Analysis of Cross-Country Herd Behavior in Stock Markets: A Regional Perspective, Working Paper.
- Demirer R., Kutan A.M. (2004) Does herding behavior exist in Chinese stock market?, Journal of International Financial Markets, Institutions and Money.
- Demirer R., Kutan A.M., Chen C. (2010) Do investors herd in emerging stock markets?: Evidence from the Taiwanese market, Journal of Economic Behavior and Organization, Vol. 76 (2).
- Gleason K.C., Mathur I., Peterson M.A. (2004) Analysis of intraday herding behavior among the sector ETFs, Journal of Empirical Finance, Vol. 11.
- Hwang S., Salmon M. (2004) Market stress and herding, Journal of Empirical Finance, Vol. 11.
- Lakonishok J., Shleiferand Vishny (1992) The Impact of Institutional Trading on Stock Prices, Journal of Financial Economics.
- Sias R. (2002) Institutional Herding, Working Paper.
- Szyszko A. (2009) Finanse Behawioralne. Nowe podejście do inwestowania na rynku kapitałowym.
- Weiner R.J., Green M.A. (2004) Do birds of a feather flock together? Speculator herding in derivatives markets, Working Paper George Washington University.
- Wermers R. (1995) Herding, Trade Reversals, and Cascading by Institutional Investors, University of Colorado, Boulder.