Cross-Country Effects in Herding Behaviour: Evidence from Four South European Markets
31 Pages Posted: 26 Mar 2011 Last revised: 14 Apr 2011
Date Written: March 21, 2011
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: Suggested Citation