Herd behavior and idiosyncratic volatility

Huang, Teng-Ching; Lin, Bo‐Yen; Yang, Tung-Hsiao

doi:10.1016/j.jbusres.2014.11.025

Cited by 49 publications

(25 citation statements)

References 37 publications

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“…In addition, many researches do not find evidence of herding using this measure or the result is inconsistent (Huang et al, 2015). Therefore, Chang et al (2000) propose a more robust proxy of herding inspired by CAPM, that is cross-sectional absolute deviation of returns (CSAD).…”

Section: Applying An International Capm To Herding Behaviour Model Fomentioning

confidence: 99%

Applying an international CAPM to herding behaviour model for integrated stock markets

Najmudin

Syarif

Wahyudi

et al. 2017

Journal of International Studies

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Abstract. Development of financial globalization in the form of stock market integration experiences a trend which is getting stronger. The analysis models in the field of finance and investments should be able to adjust to these developments. This adjustment includes the models used to detect the existence of herding behavior. All this time, the herding behavior model of individual stocks towards market consensus has been referring to CAPM theory. The basic assumption of CAPM is that financial assets at a domestic stock market are segmented from the financial assets' movement at the global market. Therefore, this paper aims to provide an alternative view in the form of an international herding model that should be applied in the context of an integrated stock market. The model was created with reference to the international CAPM. This paper combined ICAPM method and international CSAD model to identify herding for eight stock markets, the sample period being from January 2003 to December 2016. The result found that for segmented stock markets, represented by China Vol.10, No.4, 2017 48 and the Philippines, herding happened for both overall the sample period and the market crisis period. In addition, for the integrated stock markets, represented by Indonesia, Japan, Malaysia, Singapore, Thailand, and the UK, herding behavior was only found during the market crisis period. Therefore, classification of market integrations should be considered in assessing the herding behaviour at stock markets.

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Section: Applying An International Capm To Herding Behaviour Model Fomentioning

confidence: 99%

Applying an international CAPM to herding behaviour model for integrated stock markets

Najmudin

Syarif

Wahyudi

et al. 2017

Journal of International Studies

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“…We contribute to the growing body of evidence that the volatility observed in financial markets can, in part, be attributed to cognitive biases (LeRoy and Porter, 1981;Shiller, 1981;Barberis and Thaler, 2003;Huang, Lin, and Yang, 2015). In the presence of cognitive biases and/or high negotiation costs, our findings suggest that investor preferences for round pricing increments can create instability in stock prices.…”

Section: Introductionmentioning

confidence: 62%

Price clustering and the stability of stock prices

Blau

Griffith

2016

Journal of Business Research

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“…Maug and Naik observed that if institutional investors buy or sell the same stock at the same time, the pressure of buying or selling will exceed the liquidity that the market can provide, resulting in discontinuities and large changes in the stock price [22]. Empirical results of Huang et al found that the herding behavior in the equity market shows distinct patterns under various portfolios according to idiosyncratic volatility [23]. Yamamoto discovered that the relationship between the information sharing degree of herding behavior and agglomeration of asset price fluctuations is monotonic [24].…”

Section: Impacts Of Herding Behavior On Asset Pricementioning

confidence: 99%

Effects of herding behavior of tradable green certificate market players on market efficiency: insights from heterogeneous agent model

Zuo

Xin-gang

2021

Front. Energy

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Tradable green certificate (TGC) scheme promotes the development of renewable energy industry which currently has a dual effect on economy and environment. TGC market efficiency is reflected in stimulating renewable energy investment, but may be reduced by the herding behavior of market players. This paper proposes and simulates an artificial TGC market model which contains heterogeneous agents, communication structure, and regulatory rules to explore the characteristics of herding behavior and its effects on market efficiency. The results show that the evolution of herding behavior reduces information asymmetry and improves market efficiency, especially when the borrowing is allowed. In addition, the fundamental strategy is diffused by herding evolution, but TGC market efficiency may be remarkably reduced by herding with borrowing mechanism. Moreover, the herding behavior may evolve to an equilibrium where the revenue of market players is comparable, thus the fairness in TGC market is improved.

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Herd behavior and idiosyncratic volatility

Cited by 49 publications

References 37 publications

Applying an international CAPM to herding behaviour model for integrated stock markets

Applying an international CAPM to herding behaviour model for integrated stock markets

Price clustering and the stability of stock prices

Effects of herding behavior of tradable green certificate market players on market efficiency: insights from heterogeneous agent model

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