Did Investors Herd during the Financial Crisis? Evidence from the US Financial Industry

Kabir, M. Humayun

doi:10.1111/irfi.12140

Cited by 25 publications

(8 citation statements)

References 90 publications

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“…For mutual funds, the Chilean equity market may have provided a relatively less risky and fundamentally sound investment opportunity compared to global equity markets in the US and EU. Kabir (2018) studied herding in the context of the US financial sector and found evidence for "spurious" herding, which he defined as unintentional herding driven by fundamental factors. Given the Chilean institutional context, spurious herding, as suggested by Kabir (2018), rather than a reputation-based explanation, probably drives our result for AFP managers' herding behavior.…”

Section: Discussionmentioning

confidence: 99%

Stock Market Contagion during the Global Financial Crises: Evidence from the Chilean Stock Market

Mahenthiran

Gjerde

Silva

2020

IJFS

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The study examines evidence for the transmission of the US and EU financial crises via investor holdings into the Chilean stock market following two global financial crises, in 2008 and 2011. The study modified the models of Bekaert et al. (2014), and Dungey and Gajurel (2015) on the 2007–2009 global financial crisis and extends the period to include the European debt crisis of 2010–2011. The study produced three main contributions. First, changes in the equity holdings of retail investors were a key source of contagion following the 2008 US financial crisis. Second, investor herding during the 2011 financial crisis is shown to be low based on the co-movement of equity holdings between the four investor groups studied. Third, investor behavior during the 2011 EU crisis differs from that of the 2008 US financial crisis, which we attribute to firms in Chile adopting international financial reporting standards (IFRS) and improving their corporate governance. We compared the findings to the prior contagion studies that rely on Chilean return data to highlight the contributions to international financial research, particularly as it relates to the functioning of emerging capital markets during financial crises.

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Section: Discussionmentioning

confidence: 99%

Stock Market Contagion during the Global Financial Crises: Evidence from the Chilean Stock Market

Mahenthiran

Gjerde

Silva

2020

IJFS

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“…When it comes [10] study herding behavior during a crisis of 2008 in the US market. Especially, banking sectors, Commercial sectors, and insurance.…”

Section: Researchmentioning

confidence: 99%

Investigative Study of Investor’s Herding Behavior During Bullish and Bearish Market: A Case of Pakistan Stock Exchange

Hassan

Jamil

2021

EJBMR

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This study investigates the influence of herd behavior on the Pakistan stock exchange indexes KSE-100 and KSE-30 during bullish and bearish markets. Using the daily market return from 2007 to 2020. We implement the method of main herding measures, Cross-sectional absolute deviation, and Cross-sectional standard deviation, to explore the influence of herd behavior in the emerging market of Pakistan. The results indicate the presence of market-wide herd behavior: (a) along with the different direction of market positive and negative return, (b) when trading volume high, (c) when stock market highly volatile, and (d) during and the post-financial crisis. Moreover, Investors don’t herd when low trading volume and low volatility. Our study fills the gap in the literature and contributes to academic relevance by exploring the influence of herd behavior among both bull and bear periods in markets of Pakistan, it also examines the possible asymmetric effects of herding related to the market with high-low trading volume and market volatility.

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“…As such, stock market liquidity is a critical factor affecting investor herd behavior. Humayun Kabir (2018) investigates the herd behavior in US financial services industry – paying particular attention to commercial banks, investment and insurance firms during global financial crisis periods. His findings reveal a significant herd behavior during global financial crisis period (especially in the down-market).…”

Section: Literature Reviewmentioning

confidence: 99%

“…in other settings (see e.g. Bowe and Domuta, 2004; Bikhchandani and Sharma, 2000; Yao et al , 2014; Galariotis et al , 2015; Litimi et al , 2016; Bekiros et al , 2017; Humayun Kabir, 2018; Indārs et al , 2019). The herd behavior of investors could be observed during economic crisis period, due to investor reaction to changes in fundamental information.…”

Section: Empirical Findingsmentioning

confidence: 99%

Do Fama–French common risk-factor portfolio investors herd on a daily basis? Implications for common risk-factor regressions

Senarathne

2019

JCMS

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Purpose The purpose of this paper is to examine whether Fama–French common risk-factor portfolio investors herd on a daily basis for five developed markets, namely, Europe, Japan, Asia Pacific ex Japan, North America and Globe. Design/methodology/approach To examine the herd behavior of common risk-factor portfolio investors, this paper utilizes the cross-sectional absolute deviations (CSAD) methodology, covering a daily data sampling period of July 1990 to January 2019 from Kenneth R. French-Data Library. CSAD driven by fundamental and non-fundamental information is assessed using Fama–French five-factor model. Findings The results do not provide evidence for herding under normal market conditions, either when reacting to fundamental information or non-fundamental information, for any region under consideration. However, Fama–French common risk-factor portfolio investors mimic the underlying risk factors in returns related to size and book-to-market value, size and operating profitability, size and investment and size and momentum of the equity stocks in European and Japanese markets during crisis period. Also, no considerable evidence is found for herding (on fundamental information) under crisis and up-market conditions except for Japan. Ancillary findings are discussed under conclusion. Research limitations/implications Further research on new risk factors explaining stock return variation may help improve the model performance. The performance can be improved by adding new risk factors that are free from behavioral bias but significant in explaining common stock return variation. Also, it is necessary to revisit the existing common risk factors in order to understand behavioral aspects that may affect cost of capital calculations (e.g. pricing errors) and valuation of investment portfolios. Originality/value This is the first paper that examines the herd behavior (fundamental and non-fundamental) of Fama–French common risk-factor investors using five-factor model.

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Did Investors Herd during the Financial Crisis? Evidence from the US Financial Industry

Cited by 25 publications

References 90 publications

Stock Market Contagion during the Global Financial Crises: Evidence from the Chilean Stock Market

Stock Market Contagion during the Global Financial Crises: Evidence from the Chilean Stock Market

Investigative Study of Investor’s Herding Behavior During Bullish and Bearish Market: A Case of Pakistan Stock Exchange

Do Fama–French common risk-factor portfolio investors herd on a daily basis? Implications for common risk-factor regressions

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