The Impact of Herding Behavior on Stock Mispricing: The Case of Listed Companies at the Egyptian Exchange

Abstract

This paper aims at examining the impact of herding behavior on stock mispricing. Herding behavior is measured by Cross Sectional of Standard Deviation (CSSD), while stock mispricing is measured by the difference between the market value and intrinsic value of stock. This has been conducted using a sample of 24 companies are listed at the Egyptian exchange during the period from 2002 to 2018.
 Results indicate there is a significant effect of herd behavior on stock mispricing in a bivariate context, while the effect remains significant, even after controlling for inflation rate and discount rate. Besides, the discount rates don’t seem to have any significant effects on stock mispricing.

Does the Egyptian Exchange Market Still Have Herd Behavior?

“…This inefficient market with non-random prices is a general conclusion for most studies that examined the existence of herding in the Egyptian exchange market. (Nader Alber and Ehab Ezzat, 2021) (Mostafa Hussein abd-alla, 2020) the former from 2002 to 2018 and the latter during the COVID-19 crisis; however, other studies have reached different conclusions. These findings show that herding does not exist and that the market is not always inefficient and influenced by factors other than prices, on the other hand (Dalia El-Shiaty, and Ahmed Abdelmotelib Badawi, 2014), (Charilaos Mertzanis, and Noha Allam, 2018).…”