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Journal articles on the topic 'Stock market behavior'
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1
Rahma Tri Benita, Siti Damayanti, and Irwan Adi Ekaputra. "Information Distribution and Informed Trading in Mixed and Islamic Capital Markets." International Journal of Business and Society 21, no. 3 (April 27, 2021): 1333–51. http://dx.doi.org/10.33736/ijbs.3353.2020.
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The correlation between volume and frequency with return volatility can explicate the information distribution process and informed traders' transaction behavior in a stock market. In this study, the Indonesian stock market represents the mixed market, while the Saudi Arabian stock market represents the Islamic market. We find that 94% and 96% of sharia-compliant stocks in Indonesia and Saudi Arabia follow the Mixture of Distribution Hypothesis (MDH). Consequently, we may conclude that sharia-compliant stocks in both markets are informationally efficient. However, we find that informed traders tend to behave differently in both markets. In the Indonesian market, informed traders exhibit competitive behavior in 95% of shariacompliant stocks and strategic transaction behavior in only 5% of the stocks. In contrast, in the Saudi Arabian market, we find that informed traders exhibit competitive behavior in only 38% of the stocks and strategic behavior in 62% of the stocks. The findings suggest that social and religious contexts may affect market participants' behavior.
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BenMabrouk, Houda. "Cross-herding behavior between the stock market and the crude oil market during financial distress." Managerial Finance 44, no. 4 (April 9, 2018): 439–58. http://dx.doi.org/10.1108/mf-09-2017-0363.
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Purpose The purpose of this paper is to investigate herding behavior around the crude oil market and the stock market and the possible cross-herding behavior between the two markets. The analysis examines also the herding behavior during financial turmoil and includes the investor sentiment and market volatility. Design/methodology/approach The authors use a modified version of the cross-sectional standard deviation and the cross-sectional absolute deviation to include investor sentiment, financial crisis and market volatility. Findings The authors find that the volatility of the stock market reduces the herding behavior around the oil market and boosts that around the stock market. However, the investors’ sentiment reduces the herding around the stock market and boosts that around the crude oil market. Consequently, the authors can conclude that the herding behavior around the two markets moves inversely and the herding in each market is enhanced by the lack of information in the other market. Research limitations/implications This paper is limited to the herding of stocks around the crude oil market and ignores the possible herding of commodities around the oil market. Originality/value The originality of the paper rests on the study of the possible cross-herding behavior between the oil market and the stock market especially during financial turmoil.
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Ruhani, Fatima, Md Aminul Islam, and Tunku Salha Tunku Ahmad. "Review of the Literatures on Stock Price Behavior of Malaysia." International Journal of Islamic Business & Management 2, no. 2 (December 19, 2018): 32–38. http://dx.doi.org/10.46281/ijibm.v2i2.219.
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Stock price behavior is one of the core concerns of researchers and finance scholars from more than a half-century of years. Most of the times, they have tried to identify unexplored anomalies that could be used to explain stock price movement in the different stock market. As a result, we have found different models and theories relating to stock price behavior as well as the efficiency of the stock market. Malaysian stock market is considered the second among the largest South East Asian stock markets according to its domestic market capitalization. A considerable number of researches have already been done on the stock price behavior of Malaysian stock market. This study reviews the existing literatures on the stock price behavior of Malaysian stock markets within two wings, literatures on efficient market hypothesis of Malaysian market and the effect of economic and financial variables on the stock price.
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Elshqirat, Mohammad K. "Investors’ Happiness and Stock Market." International Business Research 17, no. 2 (February 22, 2024): 23. http://dx.doi.org/10.5539/ibr.v17n2p23.
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Investor feelings can affect their investing behavior in the market which may impact the stocks prices and volatility. Investor’s happiness represents a very important feeling that can affect investing behavior. The main question here is whether the launching of a country wide happiness program can affect the investors’ behavior in the stock market and consequently the prices and volatility of stocks. The methodology followed to answer this question was a quantitative methodology using data from the stock market of United Arab Emirates for the years 2015 – 2017 and information about the country’s “national program for happiness and wellbeing” that was started in 2016. Data were analyzed using paired t-test and descriptive statistics. Results revealed that happiness can affect the volatility of stock prices but not the returns of stocks in the market.
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UPADHYAY, RITESH. "Factors affecting the Investment behavior of Stock Market Investors: A Quantitative Investigation." International Journal of Management, IT and Engineering 08, no. 04 (2018): 300–307. http://dx.doi.org/10.36893/ijmie.2018.v8i4.300-307.
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One of the world's most active and complicated financial markets is the stock market. There is a sizable quantity of money invested in various stocks and securities due to the market's participation by millions of investors. Several variables, including monetary conditions, political stability, corporate performance, and personal preferences, have an impact on how investors behave in the stock market. Investors must make sound financial decisions to maximize profits and reduce risks and stock market investment behavior is a critical component of that process. It's essential for investors, financial advisors, and legislators to comprehend the variables that influence investment behavior. The way Indian stock market investors invest is influenced by a number of factors. Individual investor preferences, risk tolerance, and investment goals all have a big impact on how they behave when it comes to investing. The ability to manage the complicated and dynamic financial market can be aided by having a thorough awareness of the numerous elements that influence investing behavior in the Indian stock market.
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Silitonga, Ririn Stefani, Isfenti Sadalia, and Amlys Syahputra Silalahi. "Analysis of Herding Behavior in Developing Countries." International Journal of Research and Review 8, no. 12 (December 24, 2021): 614–21. http://dx.doi.org/10.52403/ijrr.20211274.
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When faced with market uncertainty and high volatility in financial markets, the potential for herding behavior in the stock market is likely to increase. This will cause instability in the financial market and also the economy of a country. The purpose of this study is to analyze herding behavior in the stock markets of developing countries including China, the Philippines, India, Indonesia, Korea, Malaysia, Pakistan, Taiwan and Thailand. This type of research is quantitative research and the population in this study is stocks listed on the Stock Exchanges of all developing countries with a time period from January 2016 to December 2020. The sampling method used is purposive sampling. The data used are monthly stock index data, VIX, world oil prices and the fed funds rate. Data analysis was performed through panel data regression, which is a combination of cross section and time series using the Eviews program. The results showed that there was no herding behavior in developing countries. The result of this research is that the fed fund rate has a significant effect on herding behavior in developing countries, especially in Indonesia. Keywords: Herding, Market Volatility, Oil Price, Fed Fund Rate.
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Wei-Shan Hu, John, Yen-Hsien Lee, and Ying-Chuang Chen. "Mutual fund herding behavior and investment strategies in Chinese stock market." Investment Management and Financial Innovations 15, no. 2 (May 5, 2018): 87–95. http://dx.doi.org/10.21511/imfi.15(2).2018.08.
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This investigation studies the impact of mutual fund herding on the returns achieved by contrarian strategy from 1990 to 2015 in the Chinese stock market. The relationship between the profit gained by the contrarian strategy and the macroeconomic environment is also examined. First, the returns of the contrarian strategy in China’s stock market are found to be significant. Second, most loser stocks with a high degree of mutual fund herding outperform loser stocks with a low degree of mutual fund herding, revealing that the profitability of an investment portfolio depends on the degree of mutual fund herding. Third, investors should buy loser stocks with a high degree of herding and sell winner stocks with a low degree of herding during a two-year formation period, over which zero-cost contrarian strategies yield the significantly highest return. Finally, the payoff of contrarian strategies is positively related to the herding effect and negatively related to macroeconomic variables.
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Rizal, Nora Amelda, and Mirta Kartika Damayanti. "HERDING BEHAVIOR IN THE INDONESIAN ISLAMIC STOCK MARKET." Journal of Islamic Monetary Economics and Finance 5, no. 3 (November 1, 2019): 673–90. http://dx.doi.org/10.21098/jimf.v5i3.1079.
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Indonesia Stock Exchange provides Islamic stocks for Muslim investors who want toinvest, with the first Islamic stock index in Indonesia being Jakarta Islamic Index or JIIthat consists of thirty of the most liquid Islamic stocks. The market capitalization of JIItends to increase every year. This paper examines the presence of herding behavior inemerging Islamic stock market of Indonesia using daily return of Indonesia CompositeIndex and JII from October 6, 2000 to October 5, 2018. Herding behavior could generallytrigger shifting market prices from equilibrium values. Herding behavior may beidentified from the relation between stock return dispersion and market return. Stockreturn dispersion is measured using Cross Sectional Absolute Deviation or CSAD.Generalized Auto Regressive Conditional Heteroskedasticity or GARCH method isused to detect herding behavior. GARCH does not see heteroskedasticity as a problem,instead uses it to make a model. The result indicates that herding behavior exist inIslamic stock market of Indonesia. Asymmetric herding occurs in Indonesia Islamicstock market where herding behavior exists during falling market condition only.
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Aremu Akinde, Mukail, Eriki Peter, and Ochei Ailemen Ikpefan. "Portfolio selection strategies and cognitive psychology biases: a behavioral evidence from the Nigerian equity market." Investment Management and Financial Innovations 15, no. 3 (September 14, 2018): 267–82. http://dx.doi.org/10.21511/imfi.15(3).2018.22.
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The empirical evidence in the developed equity markets such as the United States, the United Kingdom, Germany, Japan and emerging markets had pronounced that there are institutional and individual investors’ cognitive psychology and mental biases in favor of the Growth Stocks, that is, the Growth Stocks are always preferred to the Value Stocks by the investors. The investors most times prefer the Growth Stocks to the Value Stocks irrespective of the stock fundamentals behavior in the equity market. The paper investigated whether Cognitive Psychology and Mental biases affect Portfolio Selection strategies using the Growth or the Value Stocks investment styles in the Nigerian Stock Market. In the study, the summary of the primary data was described and Multinomial Logistic Regression (MLR) models were adopted to make inferential decisions. The paper collected primary data through questionnaire administered to individual and institutional investors on the floor of Nigeria Stock Exchange (NSE). The findings from the analyses conducted confirmed a strong existence of Cognitive Psychology and mental biases in favor of the Growth Stocks in the Nigerian Equity Market. Investors had more belief in Growth Stocks than the Value Stocks notwithstanding the behavior of the market fundamentals. The study recommended that investors should seriously consider occurrences and performance fundamentals in Portfolio Selection in the Nigerian Equity Market.
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Hami, Mustapha El, and Ahmed Hefnaoui. "Analysis of Herding Behavior in Moroccan Stock Market." Journal of Economics and Behavioral Studies 11, no. 1(J) (March 10, 2019): 181–90. http://dx.doi.org/10.22610/jebs.v11i1(j).2758.
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Frontier markets, particularly the Moroccan financial market, are characterized by a narrowness of market, inability to absorb erratic price fluctuations and the low liquidity of securities that encourage investors to herd and imitate those who have all the information about the market. A quantitative research approach was used to analyze the existence of herding n Moroccan stock market. The daily data used in this study concerns the period from 04/01/2010 to 29/12/2017 and contains the daily returns of the MASI and a total of 43 traded stocks. Statistical and econometric methods such as multidimensional scaling and Cross-sectional absolute deviation were used. Subsequently, after the regression models were examined, findings indicated that the first stocks with the highest similarity to the index return are BMCE, BCP, IAM, ATW and CMSR, and the first stocks with the highest dissimilarity are PAP, IBC and SNP, This will have to allow investors to choose profitable alternatives and avoid those that present a possible risk. The results did also show the existence of herding in the Moroccan stock market both upward and downward. This finding was supported by the clear existence of a non-linearity between market performance and CSAD measurement, which confirms the prediction of a non-linear inversion relationship between CSAD and ð‘…ð‘š. This could be due to the low level of transparency that prevails in frontier stock exchanges and reduces the quality of their information environment, which leads investors not to react rationally and to draw information from the transactions of their peers.
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Tashfeen, Rubeena, Saad Ullah, and Abubaker Naeem. "Investor Behavior: Does Tax Avoidance and Liquidity Preference Culture Drive Equity Prices in Pakistan." Journal of Finance and Accounting Research 2, no. 2 (August 31, 2020): 63–91. http://dx.doi.org/10.32350/jfar/2020/0202/852.
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The present study investigates market-wide herding of stock market, industry indices of Pakistan, China and USA, A-cross border herding of Pakistan stock market with Chinese stock market and USA stock market. With Cross-Sectional-Absolute-Deviation, to check whether geographical distance matters to influence the stock markets or not and USA is its major influential, cannot be ignored. Market-wide herding in Pakistan is found only during 2004 and 2008 and A-cross border herding for Pakistan is only found from the USA which support asset pricing model and market efficiency. Pakistan market do not herd around China, this negates geographical distance matters, and influence in determining investor behaviour in stock markets. It is revealed, Pakistan stock market does not observe as much herding behaviour in stock investment as other markets (USA and China), so it can be said that Pakistan stock exchange index which is representative of Pakistan Stock market is efficiently operating in contest of Herding.
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Chen, Yan, Changyu Hu, Wenjie Zhang, and Qing Li. "CEO Exposure, Media Influence, and Stock Returns." Journal of Global Information Management 29, no. 6 (November 2021): 1–19. http://dx.doi.org/10.4018/jgim.20211101.oa43.
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Media-aware stock movements are well acknowledged by the behavioral finance. As the soul of a firm, CEO’s media behavior is critical to the operation of a firm. CEO’s exposure could have captured the investors’ attention and enhanced the media effect in the stock market in terms of the “eyeball economics”, or CEO’s overexposure could have attracted more attention than firm-specific news, which attenuate the media effect in the stock market due to the investors’ limited attention. This study systematically explores the role and the moderating effect of CEO’s media behavior on the relationship between media content and stock markets. Using daily frequency data for a sample of Chinese stocks, this study shows that higher CEO media exposure attenuates the media effect on stock markets, especially consumer-related stocks.
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Nisha, Nabila. "Stock Market and Macroeconomic Behavior." International Journal of Applied Behavioral Economics 5, no. 2 (April 2016): 12–30. http://dx.doi.org/10.4018/ijabe.2016040102.
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An impressive body of research has documented that movement in stock prices are highly sensitive to changes in the macroeconomic variables of an economy. Past empirical studies have examined this relationship across different stock markets by either outlining the influence of only domestic factors or a few global variables. A recent phenomenon has been the shift of academic interest to the emerging economies to investigate this presumed linkage by focusing more on global factors due to the trend of globalization. The aim of this paper is therefore to examine the influence of only global macroeconomic factors upon stock returns in the emerging stock market of Pakistan. By employing Vector Error Correction Model (VECM), findings indicate that significant influence of the global macroeconomic factors of the international interest rates and the world price index is observed, which implies a gradual integration of KSE towards the global financial markets. Limitations and implications for practice and research are also discussed.
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Liu, Liujun. "A Comparative Examination of Stock Market Prediction: Evaluating Traditional Time Series Analysis Against Deep Learning Approaches." Advances in Economics, Management and Political Sciences 55, no. 1 (December 1, 2023): 196–204. http://dx.doi.org/10.54254/2754-1169/55/20231008.
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The contemporary financial landscape is characterized by dynamic market behavior. Accurate predictions of stock price movements are not only of paramount importance for financial decision-makers but also pose a significant challenge due to the inherent complexities of financial markets. This research study delves into the realm of stock market prediction by employing a comprehensive approach that combines time series analysis and machine learning techniques. The main goal is to assess different models in predicting price trends, potentially reshaping stock market forecasts and emphasizing the need for tailored predictive approaches for individual stocks. The study focuses on the example of Apple Inc. (AAPL) stock data and aims to uncover the effectiveness of various models in forecasting its price trends. Our results emphasize that the LSTM model surpasses the conventional ARIMA model in terms of forecasting accuracy, suggesting a promising path for improving stock market predictions. This comparative exploration provides insights into the potential of machine learning models in refining stock market predictions and highlights the importance of tailoring predictive methodologies to individual stock behaviors.
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Zevallos, Mauricio, and Carlos del Carpio. "Metal Returns, Stock Returns and Stock Market Volatility." Economia 38, no. 75 (August 1, 2015): 101–22. http://dx.doi.org/10.18800/economia.201501.003.
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Given the extensive participation of mining stocks in the Peruvian stock market, the Lima Stock Exchange (BVL) provides an ideal setting for exploring both the impact of metal returns on mining stock returns and stock market volatility, and the comovements between mining stock returns and metal returns. This research is a first attempt to explore these issues using international metal prices and the prices of the most important mining stocks on the BVL and the IGBVL index. To achieve this, we use univariate GARCH models to model individual volatilities, and the Exponentially Weighted Moving Average (EWMA) method and multivariate GARCH models with time-varying correlations to model comovements in returns. We found that Peruvian mining stock volatilities mimic the behavior of metal volatilities and that there are important correlation levels between metals and mining stock returns. In addition, we found time-varying correlations with distinctive behavior in different periods, with rises potentially related to international and local historical events.
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Rahman, R. Eki, and Ermawati Ermawati. "AN ANALYSIS OF HERDING BEHAVIOR IN THE STOCK MARKET: A CASE STUDY OF THE ASEAN-5 AND THE UNITED STATES." Buletin Ekonomi Moneter dan Perbankan 23, no. 3 (December 2, 2020): 297–318. http://dx.doi.org/10.21098/bemp.v23i3.1362.
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We construct a new dataset to examine herding behavior in the ASEAN-5 (Indonesia, Singapore, Malaysia, the Philippines and Thailand) and the US stock market. Our dataset consists of daily closing prices on the most liquid stock indices in the ASEAN-5 and the US stock market. Based on the Newey–West estimator, we show that the dominant global factor influencing herding behavior is the US federal funds rate, while the cross-market herding of the Singaporean stock market is the dominant regional factor that influence the other ASEAN stock markets. We find that herding behavior, caused by stock market index, spikes only occur in the Philippine stock market.
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Medhioub, Imed, and Mustapha Chaffai. "Islamic finance and herding behavior: an application to Gulf Islamic stock markets." Review of Behavioral Finance 10, no. 2 (June 11, 2018): 192–206. http://dx.doi.org/10.1108/rbf-02-2017-0014.
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Purpose The purpose of this paper is to examine the herding behavior in GCC Islamic stock markets. Design/methodology/approach The authors followed the methodology developed by Chiang and Zheng (2010) to test herding behavior. Cross-sectional tests have been considered in this paper. The authors use both OLS and GARCH estimations to examine herding behavior by using a sample of GCC Islamic stock markets. Findings By applying monthly data for the period between January 2006 and February 2016 for five Islamic GCC stock returns (Bahrain, Kuwait, Qatar, Saudi Arabia and UAE), results suggest a significant evidence of herd behavior in Saudi and Qatari Islamic stock markets only. When the authors take into account the existence of asymmetry in herd behavior between down- and up-market periods, evidence of herding behavior during down market periods in the case of Qatar and Saudi Arabia was found. In addition, the authors found that Kuwaiti and Emirates Islamic stock markets herd with the local conventional stock market, showing the interdependencies between Islamic and conventional markets. Research limitations/implications In this paper, the authors found an absence of herding behavior in some Islamic stock markets (Bahrain, Kuwait and Emirates). This is not the result of Shariah guidelines in these Islamic markets, but this is mainly due to the weak oscillations of returns which are very close to zero. In our future research, the authors could apply daily data and compare the results to those obtained in this paper by using monthly data. Originality/value This paper provides a practical framework in order to analyze the herding behavior concept for GCC Islamic stock markets. Its originality consists of linking the herding behavior to ethics and morality to verify whether the properties and guidelines of Islam are respected in Islamic stock markets. To the best of the authors’ knowledge, no other paper has treated the case of herding behavior in Islamic stock markets and taking into account the possible influence of the conventional market on the Islamic stock market that may impact herding behavior.
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Arslan, Syed Ali, Rukhsana Bibi, and Attiya Yasmin Javid. "Article Herding Behaviour: Empirical Analysis of Pakistan, China, USA Stock Market." Journal of Finance and Accounting Research 2, no. 2 (August 31, 2020): 1. http://dx.doi.org/10.32350/jfar/2020/0202/480.
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The present study investigates market-wide herding of the stock market industry indices of Pakistan, China, and the USA, and cross-border herding of Pakistan stock market with the Chinese stock market and USA stock market. With Cross-Sectional-Absolute-Deviation, this study checks whether geographical distance matters in influencing the stock markets or not and if the USA is it's major influential and cannot be ignored. Market-wide herding in Pakistan is found only during 2004 and 2008, and across border herding for Pakistan is only found from the USA, which supports the asset pricing model and market efficiency hypotheses. Pakistan market does not herd around China- this negates that geographical distance matters and influences in determining investor behavior in stock markets. It is also revealed that the Pakistan stock market does not observe as much herding behavior in stock investment as other markets (such as the USA and China), so it can be said that the Pakistan Stock market is efficiently operating in the context of herding.
JEL Classification: G02, G11, G14, G1
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Zhan, Feng. "Individualism, synchronized stock price movements, and stock market volatility." International Journal of Managerial Finance 15, no. 3 (June 3, 2019): 371–403. http://dx.doi.org/10.1108/ijmf-10-2018-0305.
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PurposeThe purpose of this paper is to examine the impact of national culture on herding behavior across international financial markets.Design/methodology/approachThe relation between national culture and investor behavior, and how it impacts overall market volatility is studied by examining synchronized stock price movements and stock market volatility in 47 countries around the world over the period of January 2003–May 2012.FindingsThe author finds that nations with lower values of individualistic culture are more likely to have a higher number of synchronized stock price movements. Further, the correlation between stock price movements apparently increases stock market volatility. Nations with high individualistic culture have a lower number of synchronized stock price movements and, thus, have lower levels of stock market volatility. The positive relationship between synchronized stock price movements and stock market volatility is stronger for emerging markets during the financial crisis from June 2007 to December 2008.Originality/valueThe empirical results in this paper indicate that a portion of the difference in market level volatility is attributed to the investor bias of different cultures. Investor behavior bias creates excess volatility that drives stock prices away from fundamentals. This impact is strong in nations with lower individualistic culture. The result from this research could also have a wide implication in the investment industry.
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Chowdhury, Mohammad Ashraful Ferdous, Md Mahmudul Haque, and Md Nazrul Islam. "Contagion Effects on Stock Market of Bangladesh." International Journal of Asian Business and Information Management 8, no. 2 (April 2017): 1–14. http://dx.doi.org/10.4018/ijabim.2017040101.
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Due to increased globalization and economic integration in the global economy, contagion effects have been considered an important matter for the investors and policymakers. In the wake of the global financial crisis of September 2008, Islamic financial products were thrust into the spotlight as alternatives to the shaken conventional equity markets. The objective of this study is to discover the Islamic stock market dynamics of Bangladesh with the global Islamic stock markets such as Saudi Arabia, UAE, Kuwait, Europe, UK and Japan. For understanding long run relationship or the theoretical relationships among the Islamic stock market and short run co-movements among Islamic stocks, Johansen co-integration test and Vector Error Correction model (VECM) have been applied respectively. Furthermore, the investigation on short run dynamics is also carried through Impulse Response Function (IRF) analyses. The study found that the Japanese Islamic Stock market is affected to changes in other Islamic stock markets while Kuwait stock market is the leader in the sense it affects other stock market greatly. Bangladeshi Islamic stock market is found to be marginally affecting other stock markets but not as strong as Kuwait. Global Islamic stock market seems to have very little impact to Bangladesh Islamic stock market. The evidence of co-integration and short run dynamics help a diversification benefit may be derived from the cross boarder investment. The empirical evidence of co-integration and short run dynamic relationship found in this study will help investors in making efficient investment decisions and also enhance their understanding of market behavior.
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Malini, Helma. "Behavior of Stock Return ; Evidence from Indonesia and Malaysia Shariah Stock Market." AFEBI Islamic Finance and Economic Review 3, no. 02 (September 3, 2021): 19. http://dx.doi.org/10.47312/aifer.v3i2.175.
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This study aims to determine stock return behaviour in Indonesia and Malaysia Shariah stock market. Indonesia and Malaysia are selected based on the countries level of development and geographical factor, since both countries are emerging market with a rapid growth of Shariah stock market not only in term of listed companies but also in term of number of investor. Based on geographical proximity, both countries close to each other and have a strong bilateral relationship which makes their stock market return behaviour influence by many factors. This studies relies on two major time series investigation techniques, namely Economteric Modeling of returns; The Autoregressive model, Assumption of Linearity, Volatility Modeling of GARCH and its extension. The result showed that stock return behavior happening in Indonesia and Malaysia Shariah Stock Market.
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Gazali, Masfar, Rahmadianti Thomas, and Matrodji Mustafa. "GARCH-M MODEL AND THE BEHAVIOR OF RISK-RETURN RELATIONSHIP IN INDONESIA STOCK MARKET." Jurnal Ilmiah Ekonomi Dan Bisnis 19, no. 2 (September 26, 2022): 101–9. http://dx.doi.org/10.31849/jieb.v19i2.6315.
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This study examines the risk-return trade-off and volatility behaviour in Indonesia stock market. As the analytical tool this study uses GARCH-M model with symmetric GARCH(1,1). To obtain more reliable results, this study takes daily and weekly stock index as well as 5 individual stock returns from January 2004 to November 2020 as a sample. This study also investigates the results with two alternative mean equations, simple regression and AR(1) model. The first finding of this study is that in Indonesia stock market both in stock index and in individual stocks, the volatilities of return are time varying. From investigating the risk-return relationship the results are mixed. This study finds that positive risk-return relationships in stock market index are observed both in daily and weekly data. A positive risk-return relationhip in stock market index is also found either in AR(1) model of mean equation or in simple regression model. The same results are observed in two stocks investigated. There is one stock where a positive risk return relationship is observed only in daily return data not in weekly return data. A negative risk-return relationships is observed in one stock and there is no evidence of risk-return trade-off in one stock. The conclusion is that a positive risk-return relationship as a postulated by investment theory only exists in stock index and does not exist in all stocks
Key words : Indonesia stock market, Risk-return trade-off, GARCH-M, GARCH(1,1), Time-varying volatility.
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Chaffai, Mustapha, and Imed Medhioub. "Herding behavior in Islamic GCC stock market: a daily analysis." International Journal of Islamic and Middle Eastern Finance and Management 11, no. 2 (June 18, 2018): 182–93. http://dx.doi.org/10.1108/imefm-08-2017-0220.
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Purpose This paper aims to examine the presence of herd behaviour in the Islamic Gulf Cooperation Council (GCC) stock markets following the methodology given by Chiang and Zheng (2010). Generalized auto regressive conditional heteroskedasticity (GARCH)-type models and quantile regression analysis are used and applied to daily data ranging from 3 January 2010 to 28 July 2016. Results show evidence of herd behaviour in the GCC stock markets. When the data are divided into down and up market periods, herd information is found to be statistically significant and negative during upward market periods only. These results are similar to those reported in some emerging markets such as China, Japan and Hong Kong, where stock returns perform more similarly during down market periods and differently during rising markets. Design/methodology/approach The authors present a brief literature on herd behaviour. Second, the authors provide some specificity of the GCC Islamic stock market, followed by the presentation of the methodology and the data, results and their interpretation. Findings The authors take into account the difference existing in market conditions and find evidence of herding behaviour during rising markets only for GCC markets. This result was confirmed after using the quantile regression method, as evidence of herding was observed only in highly extreme periods. Stock returns perform more similarly when market is down in Islamic GCC stock market. Research limitations/implications The research limitation consists in the fact that this work can be extended to compare the GCC stock markets with other markets in Asia such as Malaysia and Indonesia. Practical implications The principal implication consists in the fact that herding behaviour is limited in the GCC markets and Islamic finance can have an important contribution to moderate the behaviour in the financial markets. Social implications The work focusses on the role of ethics in the financial markets and their ability to reduce the impact of behavioural biases. Originality/value The paper studies the behaviour of investors in the Islamic financial markets and gives an idea about the importance of the behaviour in this particular market regarding its characteristics.
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Viona, Elsa, Fitri Santi, Berto Usman, and Dewi Rahmayanti. "Is there Herding Behavior in the Indonesia Stock Market during the COVID-19 Pandemic?" Journal of Madani Society 2, no. 1 (April 30, 2023): 1–8. http://dx.doi.org/10.56225/jmsc.v2i1.172.
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This study investigates the signs of herding behavior during the COVID-19 pandemic in the Indonesian Stock Exchange. Various studies found no herding in Indonesian stock markets during the COVID-19 pandemic, but we believe those studies have a limited methodology to capture the herding behavior. We believe that herding appears in a short time during the pandemic period, so we have to reexamine the existence of herding behavior using sectoral stock indexes rather than the stock market-wide index (IHSG) and using the rolling regression technique to capture the possibilities of herding that might be existing during short window period in COVID-19 pandemic time. This study uses a model Chang et al. suggested (2000). Variables such as return dispersion (CSAD), absolute market return, and market squared return are employed in the analysis. We use the closing price of 715 stocks, nine sectoral stock indexes in IDX, and the closing price of IHSG from January 2, 2020, until April 30, 2021. The results show that herding cannot be found in the full sample of the market-wide stock index (IHSG) and sectoral indexes. The rolling regression indicates that herding was found for several days from January 2020 to December 2021.
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Saxena, Nitin, and Ankur Ahuja. "Investors decisions in Indian Stock Market - Effect of Herd Behavior." International Journal of Trend in Scientific Research and Development Volume-2, Issue-4 (June 30, 2018): 2478–82. http://dx.doi.org/10.31142/ijtsrd14295.
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Imhanzenobe, Japhet Osazefua. "Historical Development of Frontier Stock Markets in Sub-Saharan Africa." International Journal of Professional Business Review 8, no. 7 (July 10, 2023): e02659. http://dx.doi.org/10.26668/businessreview/2023.v8i7.2659.
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Purpose: The purpose of this research is to review and compare the development of the three major frontier stock markets in Sub-Saharan Africa over time. The study provides some narrative around the historical development of each market as well as a theoretical backdrop for stock market development studies. Theoretical framework: The adaptive market hypothesis was used as the theoretical backdrop for the study. The adaptive market suggests that stock markets develop in an evolutionary manner (similar to natural selection). This evolution of stock market development is influenced by changes in investors’ behavior and regulatory standards. Design/methodology/approach: Data was collected from 1993 to 2020 on the IMF market efficiency score, the value of stocks traded, aggregate market capitalization, and the number of listed companies for the sample markets. The study used descriptive statistics and trend analysis to discuss and compare the stock market development indicators across the different selected frontier markets. Findings: The study discovered an improvement in stock market performance across the sample period. The Johannesburg Stock Exchange was found to be the most developed of the three stock exchanges. The Nigerian Stock Exchange was second while the Nairobi Stock Exchange was third. Some factors that erode the performance of these stock markets were also discussed. The practical and social implications: The sample stock markets are the major frontier markets, and so are often the first stop for foreign investors that want to penetrate the Sub-Saharan African markets. The performance of these markets often determines the level of foreign direct investment (FDI) and foreign portfolio investment (FPI) that flow into Africa. Originality/ Value: Few studies have investigated the performance of stock markets in Sub-Saharan Africa. Also, the few studies that investigate the performance of these markets rarely proceed to discuss the market-wide factors that erode the performance of these markets compared to those of developed economies. Some factors like the size of the economy, low financial literacy, misplaced government policies, poor investment culture, buy-and-hold-tight attitude, and high transaction costs were identified and discussed.
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Cont, Rama, and Jean-Philipe Bouchaud. "HERD BEHAVIOR AND AGGREGATE FLUCTUATIONS IN FINANCIAL MARKETS." Macroeconomic Dynamics 4, no. 2 (June 2000): 170–96. http://dx.doi.org/10.1017/s1365100500015029.
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We present a simple model of a stock market where a random communication structure between agents generically gives rise to heavy tails in the distribution of stock price variations in the form of an exponentially truncated power law, similar to distributions observed in recent empirical studies of high-frequency market data. Our model provides a link between two well-known market phenomena: the heavy tails observed in the distribution of stock market returns on one hand and herding behavior in financial markets on the other hand. In particular, our study suggests a relation between the excess kurtosis observed in asset returns, the market order flow, and the tendency of market participants to imitate each other.
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Chang, Ruiqian. "Financial Technology: China’s Stock Markets vs U.S. Stock Markets." E3S Web of Conferences 275 (2021): 01006. http://dx.doi.org/10.1051/e3sconf/202127501006.
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This paper provides a detailed analysis of the difference between the Chinese stock market and the U.S. stock market under the development of financial technology. In conclusion, we find that the Chinese stock market is more dominated by retail investors, but the United States owns more stocks, mostly held by institutional investors, and has a better financial mindset. The behavior of investors in the Chinese stock market is mainly the excessive speculation of investors in the Chinese market. This is one of the reasons for the many fluctuations in the Chinese stock market. Due to the speculative nature of China’s stock market, the floating ratio reflects the management mechanism of China’s stock market and helps to observe the correlation with the U.S. stock market. And technology and digitalization affect the trading of the stock market. This research is correlational, and there is no causality implied.
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Choi, Ki-Hong, and Seong-Min Yoon. "Investor Sentiment and Herding Behavior in the Korean Stock Market." International Journal of Financial Studies 8, no. 2 (June 1, 2020): 34. http://dx.doi.org/10.3390/ijfs8020034.
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This paper investigates herding behavior and the connection between herding behavior and investor sentiment. We apply a Cross-Sectional Absolute Deviation (CSAD) approach and the quantile regression method to capture herding behavior in the KOSPI and KOSDAQ stock markets. The analysis results are outlined as follows. First, we find that herding behavior is exhibited during down-market periods in the KOSPI and KOSDAQ stock markets. However, we show that adverse herding behavior occurs in low-trading volume and low-volatility periods. Second, according to the results of the quantile regression, herding behavior is found in the low and high quantiles of the KOSPI and KOSDAQ stock markets. However, adverse herding behavior is also found, which means that investors herd in extreme market conditions. Third, the relationship between investor sentiment and herding behavior is analyzed through regression and quantile regression, and investor sentiment is confirmed to be one of the important factors that can cause herding behavior in the Korean stock market.
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Brodocianu, Mihaela, and Ovidiu Stoica. "Herding Behavior of Institutional Investors in Romania. An Empirical Analysis." Review of Economic and Business Studies 10, no. 2 (December 1, 2017): 115–30. http://dx.doi.org/10.1515/rebs-2017-0057.
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AbstractDuring the last decades, institutional investors have been the main players, both in developed as well as in emerging stock markets. Thus, their investment behavior was analyzed at the national or international level, in order to assess if institutional investors herd, increase stock return volatility, affect market efficiency and liquidity, influence the corporate governance, or destabilize stock prices. This paper studies the behavior of the institutional investors on the Romanian stock market, a European frontier market that struggles to attain the status of emerging market. We examine if the disclosure level generates any herding behavior for institutional investors. In emerging markets, the lack of transparency affects the degree of investments in a listed company, as long as insider trading is pushed to the limit of the legal line. For this study, we used financial information from the companies listed on the Bucharest Stock Exchange for the period 2010-2014. The findings highlight that there is a certain herding behavior among institutional investors in Romania.
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Tauseef, Sana. "Sentiment and Stock Returns: A Case for Conventional and Islamic equities in Pakistan." Business & Economic Review 12, no. 3 (September 15, 2020): 1–22. http://dx.doi.org/10.22547/ber/12.3.1.
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The study constructs market sentiment index over the period from August 2009 to June 2019 and examines the causality between market sentiment and returns for conventional and Islamic stocks in Pakistan. Using the firm-level data for all stocks listed on Pakistan Stock Exchange, market sentiment index is constructed as the first principal component of six variables: advances-to-decline, premium on dividends, price-to-earnings, relative strength, money flow and turnover rate. We employ the Vector auto-regression model to examine the two-way causal relationship between investor sentiment and aggregate stock return. Our results show that market sentiment has strong predictive power for subsequent conventional stock returns. Sentiment based trading actions of the investors cause persistence in conventional stock returns for one month; however, as these stocks become overpriced, the price movement reverses in two months’ time. In contrast, we do not find any significant association between market sentiment and Islamic stock returns. Our findings are suggestive of different dynamics and investor behavior in Islamic financial markets of Pakistan and along with the existing literature documenting Islamic stocks performance to be at least as good as the conventional stock can be a comfort to the Muslim Investors and may serve as the catalyst to stimulate the growth of Islamic equities.
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Sun, Chao, and Yoonmin Kim. "Efficient Market Testing of the Chinese Stock Market During the COVID-19 Recession." East Asian Trade Association 4, no. 1 (June 30, 2022): 35–46. http://dx.doi.org/10.47510/jeat.2022.4.1.35.
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Purpose – The purpose of this paper is exploring whether Chinese stock market (SSEC) is effective during the COVID-19 recession. Recent asset market bubbles and bursts have generated interest in the efficiency of stock market behavior. Efficient market hypothesis (EMH) has been challenged by the COVID-19 recession.
Design/Methodology/Approach – Based on Efficient market hypothesis, this research will present results of nonparametric tests employed in an econometric investigation of stock market efficiency in China during COVID-19 recession. To test this hypothesis, the Augmented Dickey-Fuller (ADF) test, Autocorrelation Function (ACF) test, Runs test, and Variance Ratio Test were used to assess the behavior of the SSEC.
Findings – This paper studies the Chinese stock market’s (SSEC) behavior passed weak form efficient market tests for random walk. According to Variance Ratio Test, a certain group of SSEC investors could experience abnormal returns since there is a possibility that they could know something about a shock that is not already reflected in the stock's price.
Research Implications – In the management of this paper, this study will provide help for stock market investors when investing or provide reference significance for the state to manage the stock market.
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Wang, Yong, and Hanzhong Deng. "Expectations, Behavior, and Stock Market Volatility." Emerging Markets Finance and Trade 54, no. 14 (August 29, 2018): 3235–55. http://dx.doi.org/10.1080/1540496x.2018.1498331.
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Khanthavit, Anya. "Information Structure, Trading Behavior and Stock Prices in the Thai Market." Review of Pacific Basin Financial Markets and Policies 01, no. 03 (September 1998): 321–53. http://dx.doi.org/10.1142/s0219091598000211.
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This study examines the information and trading behavior of investors in the Thai market. This market is an important emerging market in the Pacific Rim, whose structure is different from that of a more developed market. We propose a vector autoregression model to describe and test action and reaction of the portfolio reallocation of investors and the movement of stock prices over time. Using daily market data from January 3, 1995 to October 27 1997 , this study finds that, in the Thai market, the foreign investors bought stocks when prices had risen. This strategy was consistent with a positive autocorrelation in the stock return. The local individual investors bought stocks when prices had fallen, while the local institutional investors disregarded past price changes. These two investor groups also exhibited herd behavior of both informational cascades and interpersonal communications types. They followed each other and reacted negatively to an innovation in the stock return. It is interesting to find that the foreign investors brought new information into the market. The local individual and local institutional investors brought in noise, but the explanatory share of this noisy information in the stock volatility was small. So, the study concludes that the volatility in the Thai market was not excessive.
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Qadri, Syed Usman, Naveed Iqbal, and Syeda Shamaila Zareen. "Stock Return Predictability and Market Efficiency in Pakistan; A Role of Asian Growing Economies of India and Malaysia." ANNALS OF SOCIAL SCIENCES AND PERSPECTIVE 2, no. 2 (November 24, 2021): 257–67. http://dx.doi.org/10.52700/assap.v2i2.95.
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The purpose of this study is to determine the predictability of the Pakistani stock market's one-day forward returns by utilizing lagged daily returns for Pakistan, India, and Malaysia from 2006 to 2016. The findings indicate that lagged Pakistani market returns significantly predict Pakistani one-day ahead market returns. However, the other two growing stock markets, India and Malaysia, show no association with one-day ahead market returns. Mostly, stock market behavior in the pre-2008 and post-2008 eras was the same, although industry return behaviour was different due to the economic crisis of 2008. However, the Pakistani stock market one-day ahead returns predict the own Pakistani lag returns due to an inefficient market and prices do not follow a random walk. As a result, investors and financial analysts can foresee and generate anomalous returns by using previous data and information.
Key words: Stock Market Returns Predictability, Stock Market crash, Market efficiency
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Qi, Liuxi. "After COVID-19 Epidemic Restriction: Investor Sentiment and Stock Market Response." Highlights in Business, Economics and Management 21 (December 12, 2023): 578–85. http://dx.doi.org/10.54097/hbem.v21i.14693.
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The economic situation and the direction of the stock market after the pandemic have become hot topics of concern for society. Despite numerous studies on the association between the stock market and investor sentiment, there is a dearth of consolidated and all-encompassing research on the subject in the context of the COVID-19 pandemic. Therefore, this article compiles pertinent information and literature on the stock markets of the United States and China amidst and following the pandemic. It delves into the connection and fundamental drivers between investor sentiment and stock returns, along with market crises, by scrutinizing and organizing the data. From the perspectives of stock returns and market crises, investor sentiment significantly affects long-term stock market returns and the occurrence of market crises by influencing investor behavior. Media orientation, herding behavior, and overreaction further explain the behavior and decisions of investors during this particular period, as well as the repercussions of these steps on the economy and the stock market need to be analyzed. These research findings contribute to a better understanding of market behavior for investors and regulatory agencies, enabling them to formulate strategies and measures to address market fluctuations and risks. The results underscore the noteworthy influence of investor sentiment on stock market returns and during market crises. Additionally, factors such as media influence, herding behavior, and overreaction shed light on the behavior and decisions of investors during this unique period.
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Khan,, Er Reshma, Gagan Ajit Singh, Shubham Behal, Kartik Sharma, and Saurabh Kumar. "Stock Prediction Using Machine Learning Methods." INTERANTIONAL JOURNAL OF SCIENTIFIC RESEARCH IN ENGINEERING AND MANAGEMENT 07, no. 11 (November 1, 2023): 1–11. http://dx.doi.org/10.55041/ijsrem27220.
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The volatility and non-linear nature of the financial stock markets make it incredibly difficult to estimate stock market returns efficiently.. Investors need rapid access to precise information while trading stocks to make intelligent selections. Programable prediction approaches have demonstrated to be increasingly successful in forecasting stock prices with the introduction of artificial intelligence and better computing capacity. However, several variables impact the decision- making process as a stock market trades multiple stocks. Furthermore, it is impossible to forecast the behavior of stock prices. All of these elements make stock price prediction, both vital and tricky. This drives research into the most accurate prediction model that creates the fewest mistakes in its projections. This research studies machine learning approaches and algorithms in an effort to increase the accuracy of stock price prediction. Keywords— Machine Learning, Linear Regression, LSTM, SVM, Decision Tree, Random Forest
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Kohl, R. "The Influence of the Number of Different Stocks on the Levy–Levy–Solomon Model." International Journal of Modern Physics C 08, no. 06 (December 1997): 1309–16. http://dx.doi.org/10.1142/s0129183197001168.
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The stock market model of Levy, Levy, Solomon is simulated for more than one stock to analyze the behavior for a large number of investors. Small markets can lead to realistic looking prices for one and more stocks. A large number of investors leads to a semi-regular fashion simulating one stock. For many stocks, three of the stocks are semi-regular and dominant, the rest is chaotic. Aside from that we changed the utility function and checked the results.
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Mukarker, Elias. "Assessing market efficiency in Palestine Securities Exchange (PSE) market at weak form: Analysis from 2010–2022." Investment Management and Financial Innovations 20, no. 3 (September 15, 2023): 285–98. http://dx.doi.org/10.21511/imfi.20(3).2023.24.
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The efficient market hypothesis (EMH) asserts that financial markets are efficient, meaning that current market values of stocks incorporate all available information. This study examines the weak-form efficiency of Palestine Stock Exchange stocks using the indices returns from 2010 to 2022. The study used parametric tests (Augmented Dickey-Fuller (ADF) unit root, serial autocorrelation) and nonparametric tests (Phillips-Perron (PP) unit root, run test, variance ratio test). The findings of these tests provide insights into the behavior of the Palestine Stock Exchange market. The run test outcomes reveal a statistically significant pattern in the data for general, insurance, and service indices, with a p-value below the significance level. Furthermore, the unit root tests indicate statistical significance for all indices with 0.00 p-values and t-statistic below the critical values of –2.86 for level and intercept, and –3.14 for level, trend, and intercept, signifying that the indices returns are stationary. In addition, serial autocorrelation test show that the general and Al-Quds indices show statistically significant links between consecutive observations at all four lags. However, the insurance, investment, and services indices show statistically significant results on three lags. The variance ratio test results challenge the random-walk hypothesis for all indices except industry and insurance. With low probability values, a discernible, long-term, predictable pattern is evident in the Palestine Stock Exchange indices. The analysis reveals that Palestine Stock Exchange index returns exhibit nonrandom behavior, suggesting predictability and patterns in daily returns, indicating the possibility of exploiting market inefficiencies in investment strategies.
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Yuliani, Isnurhadi, and Ferry Jie. "Risk perception and psychological behavior of investors in emerging market: Indonesian Stock Exchange." Investment Management and Financial Innovations 14, no. 2 (August 19, 2017): 347–58. http://dx.doi.org/10.21511/imfi.14(2-2).2017.06.
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Capital market functions as a mediator between parties who have excess funds that is, investors and those who need the funds that is, emitents. Decision to sell and buy shares of a financial asset is very strategic decision for investors because it is associated with the chances of return to be earned in the future. The objective of this paper is to investigate the investor’s psychology on buying and selling common stock in the stock exchange in emerging market. The specific purpose of this research is to provide the simultaneous empirical evidence about the perception of risk, psychology aspects towards the confidence and performance. The sample consists of 100 individual investors in Palembang, South Sumatera, Indonesia. The data were collected during March-May 2016 using questionnaire. Research findings show that perception of risk and psychology significantly affect confidence. Furthermore, confidence has a significantly positive impact on performance. This research has not been explained entirely towards the investor’s psychological behavior aspects, so the additional variable may be needed as the full reflection of investor’s psychology. The further research may use experimental study, starts from buying stocks, and factors that can be considered in selling stock.
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Khan, Safi Ullah, and Zaheer Abbas. "Does Equity Derivatives Trading Affect the Systematic Risk of the Underlying Stocks in an Emerging Market: Evidence from Pakistan’s Futures Market." LAHORE JOURNAL OF ECONOMICS 18, no. 1 (January 1, 2013): 63–80. http://dx.doi.org/10.35536/lje.2013.v18.i1.a3.
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This paper examines the behavior of beta coefficients (systematic risk) for underlying stocks around the introduction of single-stock futures (SSFs) contracts in the Pakistani market, by employing models that account for nonsynchronous and thin trading and varying market conditions as “bull” and “bear” markets. Unlike the results of earlier studies on US markets, the empirical evidence tends to support a decline in systematic risk for the majority of underlying stocks in the post-futures listings period. Nevertheless, similar to SSFs stocks, we also find empirical evidence of a decrease in systematic risk for many of the control group stocks. This indicates that changes in beta estimates for SSFs-listed stocks might not be induced by the introduction of SSFs contract trading, but could be attributed to other market-wide or industry changes that have affected the overall market. Several plausible reasons, such as lack of program trading activities normally associated with index futures, market microstructure differences between developed markets and a developing market such as Pakistan, and the capturing of the “bear” and “bull” market effects on stock betas in our estimation procedure could explain these different results for Pakistan’s market.
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Bouri, Elie, Riza Demirer, Rangan Gupta, and Jacobus Nel. "COVID-19 Pandemic and Investor Herding in International Stock Markets." Risks 9, no. 9 (September 13, 2021): 168. http://dx.doi.org/10.3390/risks9090168.
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The aim of this study is to understand the effect of the recent novel coronavirus pandemic on investor herding behavior in global stock markets. Utilizing a daily newspaper-based index of financial uncertainty associated with infectious diseases, we examine the association between pandemic-induced market uncertainty and herding behavior in a set of 49 global stock markets. More specifically, we study the pattern of cross-sectional market behavior and examine whether the pandemic-induced uncertainty drives directional similarity across the global stock markets that cannot be explained by the standard asset pricing models. Utilizing a time-varying variation of the static herding model, we first identify periods during which herding is detected. We then employ probit models to examine the possible association between pandemic-induced uncertainty and the formation of herding. Our findings show a strong association between herd formation in stock markets and COVID-19 induced market uncertainty. The herding effect of COVID-19 induced market uncertainty is particularly strong for emerging stock markets as well as European PIIGS stock markets that include some of the hardest hit economies in Europe by the pandemic. The findings establish a direct link between the recent pandemic and herd formation among market participants in global financial markets. Considering the evidence that herding behavior can drive security prices away from equilibrium values supported by fundamentals and further contribute to price fluctuations in financial markets, our findings have significant implications for policy makers and investors in their efforts to monitor investor sentiment and mitigate mis-valuations that might occur as a result. Furthermore, the evidence on the behavioral pattern of stock investors in relation to infectious diseases uncertainty can be useful in studying price discovery in stock markets and might help market participants in forming hedging strategies to mitigate downside risk in their investment portfolios.
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Ramadhansyah, Adji, Andewi Rokhmawati, Fitri Fitri, and Ifa Adina Yafiz. "Comparative Analysis of Herding Behavior in Indonesia, Malaysia, and Singapore." INTERNATIONAL JOURNAL OF ECONOMICS, BUSINESS AND APPLICATIONS 5, no. 2 (December 20, 2020): 53. http://dx.doi.org/10.31258/ijeba.5.2.53-65.
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Herding Behavior is an investor bias that affects stock market price. Stock market is one of the factors that can influence economic condition in a country. This research examine the phenomenon of herding behavior in Indonesia, Malaysia, and Singapore from 2016 to 2019. This research used secondary data, stocks return and market return, and transformed it into Cross Sectional Absolute Deviation (CSAD) to test the dispersion level of stock return to find herding behavior indication using quantile regression. This research also comparing herding behavior between Indonesia and other two countries using independent sample t test. Result showed that in all countries there were no indication of herding behavior in all kind of market condition. This research also found the difference of herding behavior between Indonesia and other countries.
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Kunwar, Kripa. "The Relationship of Behavioral Factors with Investment Performance of Individual Investors in the Nepali Stock Market." Prithvi Academic Journal 4 (May 12, 2021): 66–83. http://dx.doi.org/10.3126/paj.v4i0.37016.
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In recent years, the market anomalies and irrational behavior of investors have influenced the stock market worldwide. The impact of investor behavior on the stock market is more prominent in small and less efficient capital markets. The study is based on the questionnaire survey of 203 investors from Kathmandu and Pokhara. The study uses Exploratory Factor Analysis (EFA) to explore the underlying dimensions of investor behavior employing Principal Component Analysis and Varimax rotation. The suitability of the data for the factor analysis has been examined using KMO and Barlett’s Test of Sphericity. The EFA extracted four factors of investor behavioral dimensions categorized as: heuristics, prospects, market factors and herding effect. The factor scores obtained from the EFA was used to examine the correlation of these behavioral factors with investment performance. The results reveal that behavioral biases like heuristics, prospects, market factor and herding effect are present among individual investors in Nepal. Among the factors, the investment performance of investors is found to be influenced by heuristics and market factors. The heuristic behaviors are found to have the highest and positive influence on the investment performance. Finally, the results depict that following the herd behavior in the market and prospects does not result in the improved investor performance. The findings are helpful to understand the role of investor behavior in the stock market and formulation of appropriate policies that limit the possibility of behavioral biases affecting the stock market adversely.
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Bauman, W. Scott, C. Mitchell Conover, and Robert E. Miller. "The Performance of Growth Stocks and Value Stocks in the Pacific Basin." Review of Pacific Basin Financial Markets and Policies 04, no. 02 (June 2001): 95–108. http://dx.doi.org/10.1142/s0219091501000358.
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Many studies show that value stock strategies outperform growth stock strategies in U.S. markets and in international markets. However, the evidence is not clear as growth stocks have had higher returns in a few countries. Because the behavior of stock markets vary between different geographic regions, it is possible that the performance of these strategies may differ in the Pacific Rim region. We examine the performance of value stocks and growth stocks, defined on the basis of market price to book value per share, over the 10-year period 1986-1996, for six Pacific Rim countries. Based on over 11,900 annual stock returns, value stocks generally outperformed growth stocks over the 10-year period, and in the various Pacific Rim country stock markets. In addition, smaller cap stocks outperformed large cap stocks. Regardless of cap size, however, value stocks, on the whole, outperformed growth stocks. When growth stocks occasionally outperformed value stocks, the margin of difference tended to be small.
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Gao, Jianbo, Yunfei Hou, Fangli Fan, and Feiyan Liu. "Complexity Changes in the US and China’s Stock Markets: Differences, Causes, and Wider Social Implications." Entropy 22, no. 1 (January 6, 2020): 75. http://dx.doi.org/10.3390/e22010075.
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How different are the emerging and the well-developed stock markets in terms of efficiency? To gain insights into this question, we compared an important emerging market, the Chinese stock market, and the largest and the most developed market, the US stock market. Specifically, we computed the Lempel–Ziv complexity (LZ) and the permutation entropy (PE) from two composite stock indices, the Shanghai stock exchange composite index (SSE) and the Dow Jones industrial average (DJIA), for both low-frequency (daily) and high-frequency (minute-to-minute)stock index data. We found that the US market is basically fully random and consistent with efficient market hypothesis (EMH), irrespective of whether low- or high-frequency stock index data are used. The Chinese market is also largely consistent with the EMH when low-frequency data are used. However, a completely different picture emerges when the high-frequency stock index data are used, irrespective of whether the LZ or PE is computed. In particular, the PE decreases substantially in two significant time windows, each encompassing a rapid market rise and then a few gigantic stock crashes. To gain further insights into the causes of the difference in the complexity changes in the two markets, we computed the Hurst parameter H from the high-frequency stock index data of the two markets and examined their temporal variations. We found that in stark contrast with the US market, whose H is always close to 1/2, which indicates fully random behavior, for the Chinese market, H deviates from 1/2 significantly for time scales up to about 10 min within a day, and varies systemically similar to the PE for time scales from about 10 min to a day. This opens the door for large-scale collective behavior to occur in the Chinese market, including herding behavior and large-scale manipulation as a result of inside information.
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Blau, Benjamin M., T. Boone Bowles, and Ryan J. Whitby. "Gambling Preferences, Options Markets, and Volatility." Journal of Financial and Quantitative Analysis 51, no. 2 (April 2016): 515–40. http://dx.doi.org/10.1017/s002210901600020x.
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AbstractThis study examines whether the gambling behavior of investors affects volume and volatility in financial markets. Focusing on the options market, we find that the ratio of call option volume relative to total option volume is greatest for stocks with return distributions that resemble lotteries. Consistent with the theoretical predictions of Stein (1987), we demonstrate that gambling-motivated trading in the options market influences future spot price volatility. These results not only identify a link between lottery preferences in the stock market and the options market, but they also suggest that lottery preferences can lead to destabilized stock prices.
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Nguyen, Thuy. "A Study of Herding Behavior on Vietnam Stock Market." Journal of Economics, Finance and Accounting Studies 4, no. 4 (November 17, 2022): 93–98. http://dx.doi.org/10.32996/jefas.2022.4.4.12.
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Herding behavior is a term used to describe how a group of investors will imitate one another in order to make judgments and take action. The CSAD model developed by Chang et al. (2000) is used in this study to investigate herding behavior in the Vietnamese stock market. The empirical findings demonstrate the presence of a herding tendency in this market. The market return is further separated into subgroups to show that herd behavior manifests under various market situations. The findings show that when markets start to fluctuate, investors have a larger tendency to follow the crowd (the market is going up or going down, or the market has an extremely high return or extremely low return). The impact of the Singapore stock market on the Vietnam stock market is then evaluated. This empirical finding may be used by investors to develop investment plans and broaden their prospects for profit.
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Stavroyiannis, Stavros, and Vassilios Babalos. "Time-varying herding behavior within the Eurozone stock markets during crisis periods." Review of Behavioral Finance 12, no. 2 (July 3, 2019): 83–96. http://dx.doi.org/10.1108/rbf-07-2018-0069.
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Purpose Motivated by the ongoing debate on the existence and magnitude of herding in financial markets, the purpose of this paper is to examine Eurozone stock markets for herding behavior. In the context of the present study, the authors seek for herding behavior of stock markets as a whole as opposed to previous studies that examine herding on stock level. Design/methodology/approach To this end, the authors employ data on benchmark stock market indices for a long sample starting from 2000 through 2016. The testing procedure entails the standard Capital Asset Pricing Model-based procedure along with an advanced econometric method allowing the coefficients of the model to vary over time. Findings Results provide evidence in favor of negative herding behavior (anti-herding) for the Eurozone as a whole with noteworthy transitions. Further analysis reveals that stock markets of the periphery exhibit scarce evidence of herding, whereas continental countries are mainly characterized by negative herding behavior. Originality/value The present study’s main contribution is twofold. First, herding is examined not in sector or stock level as previous studies but at market level. Second, the testing methodology entails a pure time-varying regression model with stochastic volatility proposed by Nakajima (2011) that has not been previously employed in stock market herding. The results entail significant implications for investors seeking for diversification across Eurozone stock markets.
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Škrinjarić, Tihana. "Revisiting Herding Investment Behavior on the Zagreb Stock Exchange: A Quantile Regression Approach." Econometric Research in Finance 3, no. 2 (December 9, 2018): 119–62. http://dx.doi.org/10.33119/erfin.2018.3.2.3.
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Herding investment behavior on stock markets has consequences for practitioners, theorists, and policy makers. Thus, empirical research on this topic in the last couple of years has grown exponentially. However, there exist only a few papers dealing with herding behavior that consider the Croatian stock market. This study employs the quantile regression approach of estimating several herding investor behavior models of this market for the first time in the literature. Based upon daily data for the 37 most liquid stocks in the Zagreb Stock Exchange (ZSE) for the period September 22, 2014 to May 8, 2018, several model specifications are determined using quantile regression. Because the quantile regression approach deals with specific characteristics of financial data (stylized facts) better than the OLS method, more robust results can be achieved for evaluating if herding behavior is present in the Croatian market. The results indicate very weak to almost nonexistent evidence of herding behavior in the ZSE. Moreover, market volatility does not have any effect on herding behavior. Finally, the economic and political crisis (regarding concern Agrokor) in 2017 was controlled for in the model and the crisis was found insignificant. It seems that herding behavior does not need to be taken into account when tailoring investment strategies on the ZSE.