Cross-Country Effects in Herding Behaviour: Evidence from Four South European Markets

31 Pages Posted: 26 Mar 2011 Last revised: 14 Apr 2011

See all articles by Fotini Economou

Fotini Economou

Independent

Alexandros Kostakis

University of Liverpool Management School; University of Manchester - Manchester Business School

Nikolaos Philippas

University of Piraeus - Department of Business Administration

Date Written: March 21, 2011

Abstract

This study provides comprehensive evidence testing for the existence of herding effects in the Portuguese, Italian, Spanish and Greek market, constructing a survivor-bias-free dataset of daily stock returns during the period January 1998 - December 2008. Moreover, it examines the potential asymmetries of herding effects with respect to the sign of the market return, trading activity and volatility. A novel feature of this study, with implications for financial stability in the Eurozone and international portfolio diversification, is to examine whether the cross-sectional dispersion of returns in one market is affected by the cross-sectional dispersion of returns in the rest three markets. Finally, it tests whether herding effects became more intense during the recent global financial crisis of 2007-2008.

Keywords: Herding behaviour, PIGS, International financial markets, Cross-sectional dispersion of returns, Financial crisis

JEL Classification: G01, G12, G15

Suggested Citation

Economou, Fotini and Kostakis, Alexandros and Philippas, Nikolaos, Cross-Country Effects in Herding Behaviour: Evidence from Four South European Markets (March 21, 2011). Journal of International Financial Markets, Institutions and Money, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1791582

Fotini Economou

Independent ( email )

Alexandros Kostakis (Contact Author)

University of Liverpool Management School ( email )

Chatham Building
Liverpool, L69 7ZH
United Kingdom

HOME PAGE: http://www.alexkostakis.com

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Nikolaos Philippas

University of Piraeus - Department of Business Administration ( email )

80, Karaoli & Dimitriou, Piraueus
Athens, 18534
Greece

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