Herding Behavior

This paper investigates the Tunisian mutual funds herding behavior under different market conditions, by using the cross-sectional standard deviation (CSSD) model, cross-sectional absolute deviation (CSAD) model and the Quantile Regression approach. We test for the existence of herding for the whole period, as well as for the pre-and post-Tunisian uprising period. For the whole period, we find evidence of herding behavior based on the CSAD model only in down market conditions. Although, by considering for Tunisian 2011 uprising, this analysis report that when we applying CSSD and CSAD approach in different market conditions, there exist no evidence of herding neither before nor after uprising. We find that the mutual funds did not change their behavior following political and social events. Finally, by applying quantile regression analysis, we find evidence of herding behavior in high and low quantiles, under only down market. Conversely, during upper market, we show an absence of herding behavior in all different quantiles. When the market is down, managers afraid of uncertainty, neglecting their own information, avoid to act independently and follow other mutual funds. When the market is up, managers become rational, and act independently.

Behavioural finance is a recent approach in financial markets that has appeared because of the complexities long faced by the traditional or neoclassical finance theory. This paper investigates the influence of investor sentiment and herding behaviour on stock market liquidity using an empirical study on the Egyptian Stock Market. We examine the direct impact of the Egyptian investor sentiment on the Egyptian Stock Market liquidity. As well as the indirect impact of the Egyptian investor sentiment on the Egyptian Stock Market liquidity through the Egyptian investor herding behaviour. Therefore, the major contribution is filling the gap of indirect sentiment-liquidity impact conflict. We use the monthly data of the EGX30 index from January 2004 up to December 2018 for building up investor sentiment index, investor herding behaviour, and stock market liquidity measures. Moreover, we are using two additional types of data (closed-end mutual fund discounts and the equity open-end mutual...

This paper investigates the herding behavior among Chinese American Depository Receipts (ADRs) during 1993-2008. We find the evidence of herding among Chinese ADRs in both rising and falling markets. Moreover, the herding has no significant difference in the host market (NYSE or NASDAQ), where the ADRs were traded, and the underlying markets (mainland China or Hong Kong), where the ADRs were issued. However, we find that herding occurs only among those Chinese ADRs issued during the time of Internet bubble, indicating that market timing has great effects on herding behavior, while the origin of issuers does not matter. Thus, this paper concludes that the herding behavior of Chinese ADRs supports the information-driven hypothesis, and this result has important implication on global financial crisis. This paper suggests that information-driven herding exists among Chinese ADRs. The results support our hypothesis that Chinese ADRs are dominated by sophisticated investors. To further stabilize ADR stock markets, it is imperative to improve information transparency of the underlying firms, especially those Chinese ADRs issued during the time of Internet bubble.