A new measure of herding and empirical evidence
Hwang, Soosung and Salmon, Mark H. (Mark Howard), 1949- (2001) A new measure of herding and empirical evidence. Working Paper. Coventry: Warwick Business School, Financial Econometrics Research Centre. Working papers (Warwick Business School. Financial Econometrics Research Centre) (No.01-).
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Official URL: http://www2.warwick.ac.uk/fac/soc/wbs/research/wfr...
This study proposes a new measure and test of herding which is based on the crosssectional dispersion of factor sensitivity of assets within a given market. This new measure enables us to evaluate the directions towards which the market may be herding and separate these from movements in fundamentals. We apply the test to an analysis of the US, UK, and South Korean stock markets and somewhat surprisingly, find statistically significant evidence of herding towards ”the market portfolio” during relatively quiet periods rather than when the market is under stress. The approach also allows us to investigate herding towards other factors beyond the market factor and we find that the US market shows significant herding towards “value” after the Russian Crisis in 1998.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
|Divisions:||Faculty of Social Sciences > Warwick Business School > Financial Econometrics Research Centre
Faculty of Social Sciences > Warwick Business School
|Library of Congress Subject Headings (LCSH):||Chi-square test, Statistical hypothesis testing, Distribution (Probability theory), Risk management, Stock exchanges -- Great Britain, Stock exchanges -- United States, Stock exchanges -- Korea (South)|
|Series Name:||Working papers (Warwick Business School. Financial Econometrics Research Centre)|
|Publisher:||Warwick Business School, Financial Econometrics Research Centre|
|Place of Publication:||Coventry|
|Official Date:||November 2001|
|Number of Pages:||35|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
Banerjee, A. ”A Simple Model of Herd Behavior.” Quarterly Journal of Economics 107 (1992), 797-818.
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