A Cross-Country Analysis of Herd Behavior in Europe

39 Pages Posted: 14 Jun 2014

See all articles by Mobarek Asma

Mobarek Asma

Stockholm Business School

Sabur Mollah

Sheffield University Management School, University of Sheffield; Swansea Management School, Swansea University; Hull University Business School; Hull University Business School

Kevin Keasey

University of Leeds - Division of Accounting and Finance

Date Written: June 13, 2014

Abstract

This paper examines country specific herding behavior in European liquid constituent indices for the period of 2001-2012. While we report insignificant results for the whole period, we document significant herding behavior during crises and asymmetric market conditions. Particularly, herding effect is pronounced in most continental countries during the global financial crisis and Nordic countries during the Eurozone crisis. However, PIIGS countries are the victims in both crises. Furthermore, we find evidence that the cross sectional dispersions of returns can be partly explained by the cross sectional dispersions of the other markets, with Germany having the greatest influence on the regional cross-country herding effect. Apprehensions heighten among the regulators, policy makers, and investors in the European markets for the herding behavior during volatile market conditions.

Keywords: Herding, Cross-sectional Dispersion of Returns, Global Financial Crisis, Eurozone Crisis

JEL Classification: G01, G12, G15

Suggested Citation

Asma, Mobarek and Mollah, Sabur and Keasey, Kevin, A Cross-Country Analysis of Herd Behavior in Europe (June 13, 2014). Journal of International Financial Markets, Institutions and Money, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2450023

Mobarek Asma (Contact Author)

Stockholm Business School ( email )

Roslagsvägen 1010
Stockholm, SE-106 91
Sweden

Sabur Mollah

Sheffield University Management School, University of Sheffield ( email )

Conduit Road
Sheffield, Sheffield S10 1FL
United Kingdom

Swansea Management School, Swansea University ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Great Britain HU6 7RX
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Hull HU6 7RX
United Kingdom

Kevin Keasey

University of Leeds - Division of Accounting and Finance ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 2618 (Phone)

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