Dynamic Herding Behavior in Pacific-Basin Markets: Evidence and Implications

Chiang, Thomas; Tan, Lin; Li, Jiandong; Nelling, Edward

Volume 17, Numbers 3 & 4 / September/December , Pages 149-369

Multinational Finance Journal, 2013, vol. 17, no. 3/4, pp. 165-200
Thomas Chiang , Drexel University, USA
Lin Tan , California State Polytechnic University, USA
Jiandong Li , Central University of Finance and Economics, China

Edward Nelling , Drexel University, USA Corresponding Author

Abstract:
This study examines investor herding behavior in Pacific-Basin equity markets. Results indicate that the level of herding is time-varying, and is present in both rising and falling markets. It is positively related to stock market performance, but negatively related to market volatility. Herding estimates across markets are positively correlated, signifying comovement of herding behavior in the region. The findings suggest that tests for herding should consider its dynamic behavior.

Keywords : herding behavior, stock return dispersion, kalman filter, nonlinearity, pacific-basin markets
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