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International herding: Does it differ across sectors?

Lookup NU author(s): Professor Bartosz GebkaORCiD

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Abstract

This paper investigates the existence of herding in the global equity market. We apply a methodology which utilises cross-country dispersion in index returns. An analysis of national indices world-wide unveils virtually no instances of global information cascades, as price patterns largely adhere to the predictions of the rational pricing models. However, some sector-specific indices reveal price patterns indicative of traders’ irrationality, especially in basic materials, consumer services, and oil and gas. This can be driven by a group of investors following each other in and out of markets, overconfidence, or excessive flight to quality. These irrational patterns decline over time.

Publication metadata

Author(s): Gebka B, Wohar M

Publication type: Article

Publication status: Published

Journal: Journal of International Financial Markets, Institutions and Money

Year: 2013

Volume: 23

Pages: 55-84

Print publication date: 21/09/2012

ISSN (print): 1042-4431

ISSN (electronic): 1873-0612

Publisher: Elsevier BV

URL: http://dx.doi.org/10.1016/j.intfin.2012.09.003

DOI: 10.1016/j.intfin.2012.09.003

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