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We analyze herding behavior in the Chinese stock markets in the context of the COVID-19 pandemic using the cross-sectional absolute deviation (CSAD) model proposed by Chang et al. (2000) to detect herding behavior in the time period between January 30, 2001, and June 12, 2020. We consider stock prices for all firms listed (A-shares) on the Shanghai...
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Citations
... (Jiang et al. 2022) demonstrated the clear presence of herding during COVID-19 in six Asian stock markets (Japan, South Korea, China, Hong Kong, Singapore, and Taiwan). (Maquieira and Espinosa Méndez 2022) showed that herding behavior was more pronounced after the COVID-19 period in the Chinese equity market. (Bogdan et al. 2022) examined 15 European countries and observed that herding was most prominent in emerging markets, subsequently trailed by frontier markets and developed markets. ...
... Investors tend to exhibit herding during crisis periods caused by exogenous shocks such as the COVID-19 pandemic, due to panic-driven market behavior and heightened uncertainty (Ampofo et al. 2023;Bogdan et al. 2022;Bouri et al. 2019;Dam et al. 2023;Espinosa-Méndez and Arias 2021;Fang et al. 2021;Ferreruela and Mallor 2021;Jiang et al. 2022;Maquieira and Espinosa Méndez 2022;Vidya et al. 2023;Nguyen and Vo 2024). ...
... Herding behavior may prevail during the periods of high or low market volatility, with stronger herding expected in high volatility conditions in which increased market uncertainty amplifies collective decision-making (Arjoon and Bhatnagar 2017;Batmunkh et al. 2020;Choi and Yoon 2020;Maquieira and Espinosa Méndez 2022;Yao and Tangjitprom 2019;Vo and Phan Dang 2016). ...
The results reveal significant evidence of herding in the overall, bearish, and extended crisis market phases during extreme downturns, while the magnitude of market returns in the tail distribution is considered. Asymmetric herding behavior is more pronounced and prevalent, conditioned by market dimensions like return direction, trading volume, and volatility, with CSSD proving more effective than CSAD in detecting asymmetric patterns. Notably, herding strongly appears in the COVID-19 market during periods of abnormally high market volatility, reflecting heightened market sentiment. Applying Dow Theory to delineate bull and bear market phases significantly improved the methodological complexity and analytical depth related to herding behavior. These findings suggest policy implications for regulators and market participants in minimizing herding effects to create an efficient market environment through enhanced market surveillance, improved investor education, and the use of advanced technologies.
... The impact of volatility on herding behavior can vary depending on market conditions and the predominant investor types. Research by Maquieira & Espinosa Méndez (2022) indicates that herding tendencies are more pronounced in low-volatility market environments, whereas increased volatility tends to promote more rational and independent decision-making among investors. Additionally, Vieito et al. (2024) discovered that ARCH and GARCH effects are notable in the herding model within the MILA market, indicating that market volatility directly affects the herding behavior of investors. ...
This research examines the connections between herd mentality, price fluctuations, and company size in relation to stock performance for firms listed on the IDX from January 2019 through December 2023. The LSV approach is employed to quantify herding behavior, while historical data is used to calculate volatility. The study investigates how market capitalization and volatility influence the link between herd mentality and stock returns. Weekly stock prices, company valuations, trading volumes, and sales proportions from TradingView comprise the dataset. Findings indicate that market capitalization significantly enhances the relationship between herd behavior and stock returns, particularly for large-cap enterprises. Conversely, volatility weakens this relationship, with herd behavior's impact on stock returns diminishing in turbulent market conditions. These results highlight the significance of company size and market volatility in comprehending group investor conduct and its effects on stock market outcomes. The study's implications include the creation of more flexible investment tactics and market regulations that promote stability across various market scenarios.
... Also, research around Ebola outbreak events throughout 2014-2016 revealed that US companies with exposure to their operations in West African countries were experiencing negative returns and increased volatility because of those events. Those Ebola-related events affected investors' perceived risk (Silverstone, 2021) For all companies listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange in China, Maquieira & Espinosa (2022) revealed a more pronounced herd behaviour tendency when market return is high and volatility is low. In another, relatively broader study, Liu et al. (2020) investigated the impact of Covid-19 on the world's 21 leading stock exchanges. ...
The fixed and floating exchange rate systems exhibit essential differences. The paper attempts to provide empirical clarification concerning the type of exchange rate regime that has the most favourable impact on stock market returns and prices of the BRICS and African markets using the GLM regression method. The results are based on the inverse Gaussian functions and also identity and 1og functions of the estimated generalized linear model. The fixed exchange regime impacted adversely and significantly on the stock prices of both stock markets. The floating regime impacted favourably and significantly on the stock prices of the BRICS and African stock markets at the inverse Gaussian and Gamma identities. Whereas the fixed regime impacted adversely on stock returns of the BRICS markets at Gaussian identity, it impacted positively but rather insignificantly on the performance of stock returns of African markets. For African stock markets, both the floating and fixed regimes impacted stock returns positively, but the impact of the fixed regime is significant and also of a higher magnitude compared to that of the floating regime (17.313>10.885) HIV and Covid-19 deaths have significant inverse effects on stock prices of African stock markets. For the BRICS markets, the effect of Covid-19 on prices and returns was negative but insignificant. Only stock return effect of HIV was adverse and significant for the BRICS markets. The research findings will be useful for financial marketers involved in international financial trade and seeking to align with developments in international financial markets.
... The study revealed weighty evidence of herd tendency in share markets, namely Shanghai and Shenzhen B, but significantly no signs of herd activity were found in the market, namely A-share. In recent times, Maquieira and Espinosa Méndez (2022) found that herding behaviour was proven to be higher during the COVID-19 crisis period in Oceania's financial markets. Similar results were found in the investigation conducted on six Asian markets using CSSD (Cross sectional Standard Deviation) and CSAD in alignment with two models, namely the Hwang and Salmon (2004) model and Markov-switching regression to test for herding (Jiang, Wen, Zhang, & Cui, 2022). ...
The rapid growth of the Indian stock market in recent decades has prompted much study on investing, focusing on understanding and analysing investors' tactics for investment and trading. Over the years, researchers have cited and conducted in-depth investigations into various psychological biases. Herding bias is extensively studied to understand how investors participate in investment and trading in the Indian stock market. The current study on herding provides an investigation into the existence of herd activity in the share market of India. The study attempts to identify herd activity during positive, negative, extreme positive, and extreme negative market conditions, as well as during structural breakpoints and trade volumes that are low as well as high. The researchers have used the modified CSAD (Cross Sectional Absolute Deviation) model to enhance its validity. The findings reveal the rationality of investors during the different market states. However, herding behaviour was evidenced during certain periods at the structural breakpoint. This implies that during positive as well as negative market conditions, herding behaviour is absent, except during certain structural breakpoints and high trading volumes.
... The existence of herding has gained much importance in the last few decades. The inability of classical financial models to answer the abnormal price movements has piqued curiosity in behavioral finance (Maquieira and Espinosa Méndez, 2022). Behavioral finance describes the psychological aspects that affect investor decision-making. ...
... Sihombing et al. (2021) describe that herding behavior is more prominent in emerging stock markets than in developed ones as the emerging stock markets are informationally less efficient. Maquieira and Espinosa Méndez (2022) claim that COVID-19 has intensified herding behavior in financial markets. Results showed that herding is a short-term phenomenon and rolling regression methodology was used to estimate herding behavior. ...
... For example, investors are afraid of estimating logical conclusions from information available to them. So, they mimic the actions of other investors in the market (Maquieira and Espinosa Méndez, 2022). Ho et al. (2014) suggest that the performance of Shariah compliance stocks is much better than conventional stocks. ...
The worldwide financial environment has experienced substantial upheavals amid both the Global Financial Crisis (GFC) and the COVID-19 pandemic. Gaining insight into investor behavior, with a specific focus on herd behavior, during these periods is essential for a comprehensive understanding of market dynamics. The authors intend to compare and analyze investor herding behavior in the Pakistani Stock market, specifically focusing on shariah-compliant and conventional stocks during both the Global Financial Crisis (GFC) and the COVID-19 pandemic. The study explores how stock return dispersions behave in response to significant upward and downward movements in the market index. Additionally, the research distinguishes between the overall and sector-specific performance of Shariah-compliant and conventional stocks. To examine participant herding behavior, the authors applied the cross-sectional absolute deviation model (CSAD) to the daily data of the Karachi stock market. The results indicate that both Shariah-compliant and conventional stocks exhibited a weak form of herding during the GFC. Furthermore, different sectors displayed varying degrees of herding intensity during this crisis. Notably, a substantial increase in herding behavior was observed during the COVID-19 pandemic. These findings have crucial implications for portfolio diversification strategies during financial crises, emphasizing the identification of safe havens by constructing portfolios across diverse segments and sectors. This research contributes to the existing knowledge on herding behavior by examining two distinct hypotheses related to conventional and shariah-compliant stocks, and the empirical evidence supports these hypotheses.
... Por consiguiente, se resalta que el cálculo de los indicadores se aplicó a cada una de las empresas emisoras. Por otro lado, al realizar el análisis fundamental se estudia los factores económicos que afectaron a las empresas durante la expansión del virus, de igual forma se analiza la capacidad y estado de las empresas en cuanto a su rentabilidad en las acciones y la parte de inversión [19]. ...
Los mercados bursátiles son de gran importancia para el desarrollo de la economía de un país, considerando que son el canal por medio del cual se constituye la estructura financiera, cuya finalidad principal consiste en la redistribución de los recursos que tiene un sector productivo y que al mismo tiempo requieren de la captación de recursos con el fin de poder crecer de forma continua; que tienen el capital para poder invertir en recursos que en el futuro producirán rentabilidad. Por consiguiente, el desarrollo de la investigación tiene como propósito determinar los efectos de la pandemia por COVID-19 en la situación financiera en las empresas del sector industrial que cotizan en la bolsa de valores de Colombia; por medio de este proceso se determinan aspectos claves para el diseño de la investigación ya que es de tipo descriptiva con un enfoque cuantitativo dónde relaciona el marco metodológico de la investigación que se basará en sistematización de conocimiento, por ende, se llevará a cabo el análisis de los efectos financieros producidos por la pandemia del COVID-19 mediante la recolección de datos numéricos y estadísticos obtenidos a través de los estados financieros de las empresas industriales que cotizan en la Bolsa de Valores de Colombia, mediante la ejecución del estudio no experimental. Del mismo modo se trazaron los objetivos con la finalidad de realizar una investigación exhaustiva de los principales efectos generados por la pandemia tomando como segmento las empresas industriales que cotizan en la bolsa de valores colombiana. De igual forma se realiza la inclusión de teorías, antecedentes y normatividad legal que servirán de apoyo para resolver el problema que inicialmente se planteó. No obstante, los resultados a obtener en la investigación tienen como propósito analizar los cambios y efectos que presentaron las empresas en su situación financiera durante la pandemia por COVID-19 en el sector industrial que cotizan en la Bolsa de valores de Colombia.
The rapid expansion of the Indian stock market in recent decades has spurred extensive research into investor behavior, particularly focusing on trading and investment strategies. Among various psychological biases influencing investor decisions, herding behavior has received significant academic attention. This study empirically examines the presence of herding dynamics in the Indian equity market using a modified Cross-Sectional Absolute Deviation (CSAD) model, enhancing robustness and validity. The investigation explores herding tendencies across different market phases—positive, negative, extreme positive, and extreme negative returns—as well as during structural breakpoints and varying trade volume conditions. The findings suggest that, while investors generally exhibit rational behavior across most market conditions, evidence of herding emerges specifically during certain structural breakpoints and periods of high trading volume. These results underscore the conditional nature of herding in the Indian stock market and offer insights for policymakers, investors, and analysts seeking to understand collective behavior in financial markets.
Purpose – The objective of this study is to explore the key elements influencing decision- making processes among young individuals in China. The selected factors are emotional intelligence, herd behaviour, overconfidence, accounting information and financial literacy. In addition, this study aims to examine whether trust acts as a mediating factor between these factors and investment decision making. Methodology – This study employed an online survey questionnaire distributed to young investors in Shenzhen aged between 30 and 42 years. The questions were modified from prior studies, and responses were collected through a 5-point Likert-type scale. G*Power was employed for calculating the minimum sample size, resulting in at least 500 useable responses. A total of 507 surveys was distributed, of which 504 responses were utilised. For data analysis, PLS-SEM was employed in this study as it is suitable for handling complex model and exploratory research. Findings – All the variables are supported. Emotional intelligence, accounting information and financial literacy are positively correlated, whereas herd behaviour and overconfidence are negatively correlated. In addition, trust acts as a positive mediating factor in these relationships, except in the case of herd behaviour and overconfidence. Practical implications – Retail and corporate investors can be aware of their behavioural biases and control their emotions to make rational decisions. The government can foster a better understanding of investor behaviour and formulate the necessary policies to stimulate and stabilise the economy.
The purpose of this article is to analyze the effect of the Covid-19 crisis on herding behavior after it ended, comparing it to the 2008 crisis across a large number of countries. Although the existence of herding behavior in financial markets over crisis periods has already been evaluated by some authors, this evaluation has been limited to only a few markets, and many others remain unevaluated. However, this article explores herding behavior during financial crises, focusing on the 2008 global financial crisis and the Covid-19 pandemic, offering a comparative analysis of both events. Using the CSAD of returns method, a sample composed of 31 stock markets and 195.174 observation days (from 02 January 2000 till 05 May 2023) is analyzed. Herding behavior is found during the entire period, during the different periods of crises, during both high and low volatility periods, and during both high and low trading volume periods.
