Herding Behavior during the Subprime Mortgage Crisis: Evidence from Six Asia-Pacific Stock Markets

Laih, Yih-Wenn; Liau, Yung-Shi

doi:10.5539/ijef.v5n7p71

Cited by 23 publications

(11 citation statements)

References 38 publications

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“…It is worth noting from Table 1 that that these subsectors (healthcare facilities, medical equipment manufacture, pharmaceuticals diversified, biotechnology, diagnostic substances) are among those that have seen increase in foreign shareholding presence between 2004 and 2014. This gives credence to the view of [ 63 , 64 ] that foreign investors may exhibit herding behavior more visibly than domestic individual investors. Comparing the estimates for across subsectors, it is noted that the effect of herd behavior in medical tourism and other medical support services are relatively higher than the other subsectors.…”

Section: Results Of Return Dispersion Modelssupporting

confidence: 58%

The effect of herd formation among healthcare investors on health sector growth in China

Zhou

Antwi

Wang

et al. 2016

Int J Equity Health

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BackgroundChina has become the world‘s second largest healthcare market based on a recent report by the World Health Organization. Eventhough China achieved universal health insurance coverage in 2011, representing the largest expansion of insurance coverage in human history achieved; health inequality remains endemic in China. Lessons from the effect of market crisis on health equity in Europe and other places has reignited interest in exploring the potential healthcare market aberrations that can trigger distributive injustice in healthcare resource allocation among China’s provinces. Recently, many healthcare investors in China have become more concerned about capital preservation, and are responding by abandoning long term investments strategies in healthcare. This investment withdrawal en mass is perceived to be influenced by herding tendencies and can trigger or consolidate endemic health inequality.MethodsOur study simultaneously employs four testing models (two state spaced models and two return dispersion models) to establish the existence of procyclical (herding) behavior among the stocks and its health equity implications. These are applied to a large set of data to compare and contrast results of herd formation among investors in fourteen healthcare sectors in China.ResultsThe study reveals that apart from the cross sectional standard deviation (CSSD) model, the remaining two models and our augmented state space model yields significant evidence of herding in all subsectors of the healthcare market. We also find that the herding effect is more prominent during down movements of the market.ConclusionHerding behavior may lead to contemporaneous loss of investor confidence and capital withdrawal and thereby deprive the healthcare sector of the much needed capital for expansion. Thus there may be obvious delay in efforts to bridge the gap in access to healthcare facilities, medical support services, medical supplies, pharmaceuticals, biotechnology, diagnostic substances, medical laboratory and advanced medical equipment across China. Moreover, a potential crash in the healthcare market is possible in the healthcare sector as a result of persistent herding tendencies among investors and that may have more damaging consequences for health inequality in China.

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Section: Results Of Return Dispersion Modelssupporting

confidence: 58%

The effect of herd formation among healthcare investors on health sector growth in China

Zhou

Antwi

Wang

et al. 2016

Int J Equity Health

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“…Financial crisis is defined as the decrease in the exchange rate of a country's currency against foreign currency (devaluation) caused by the pressure on the exchange rate market [6]. Exchange market pressure index using a formula developed on reference [6] as follows:…”

Section: Exchange Market Pressure Indexmentioning

confidence: 99%

“…The focus of this study was the effect of herd behavior to the financial crisis occurring in the subprime mortgage crisis in 2008 and the banking crisis of 2013 in the Indonesian capital market using VAR models (Vector autoregressive). Research on herding behavior during the subprime mortgage crisis have been done by reference [6] on six stock markets in Asia Pacific include Taiwan, China, South Korea, Singapore, Hong Kong, and Japan. On the stock markets in developing countries such as Taiwan and China, where the market is dominated by individual investors and the daily price limit known, herding behavior tends to occur.…”

Section: Introductionmentioning

confidence: 99%

Herd Behavior and Indonesian Financial Crisis

Armansyah¹

2018

JOAMS

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Indonesia is one of an emerging country in Asia. As an emerging country, Indonesian capital market attract the investor from around the world to make investment. Investment require good, clear information and trustworthy to make decision. The information that investor received may vary to other investor. These differences could lead to herd behavior. Good herd behavior will lead to economic growth otherwise will lead to crisis. These research examine the effect of herd behavior of investors to the financial crisis of 2008 and 2013 of the Indonesian capital market. Variables used in this research is financial crisis was measured using Exchange Market Pressure Index (EMPI) and herd behavior measured with LSV formula. The method used is a model of Vector Auto Regression (VAR) with a stationary test phase, co-integration test, VAR estimations, impulse response analysis, analysis of variance decomposition, and causality test. The findings is indicate that investors in Indonesia stock market has irrational behavior that leads to herd behavior, especially during financial crisis furthermore, herding behavior affecting the occurrence of financial crisis in Indonesia. These findings provide knowledge about the effect of herding behavior in financial crisis Indonesia and provide input for academics in the field of behavioral finance management, especially in the development of capital markets and for investors to give feedback on the importance of the behavior of investors in the Indonesian capital market.

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“…In fact, the occurrence of a financial crisis usually relates to the herding effect (see, e.g. Laih and Liau, 2013) through many synchronous failures in financial institutions or market participants. After financial market regulation has been loosened, bank managers or policymakers may have less precise judgment after their entry into new businesses.…”

Section: Introductionmentioning

confidence: 99%

Bank Income Diversification, Asset Correlation and Systemic Risk

Chen

Zeng

2019

South African J Economics

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This paper explores whether the asset correlations among the non‐interest activities of banks are the key causes for enhancing the bank diversification‐systemic risk nexus. Our empirical evidence indicates that banks' income diversification significantly raises systemic risk. After removing those banks with high asset correlations, the effect of individual banks' diversification on banking systemic risk turns insignificant or even inverse. The results show that high asset correlations among banks could introduce bank failures, thereby leading to higher systemic risk in the financial sector.

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Herding Behavior during the Subprime Mortgage Crisis: Evidence from Six Asia-Pacific Stock Markets

Cited by 23 publications

References 38 publications

The effect of herd formation among healthcare investors on health sector growth in China

The effect of herd formation among healthcare investors on health sector growth in China

Herd Behavior and Indonesian Financial Crisis

Bank Income Diversification, Asset Correlation and Systemic Risk

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