Bond Market Investor Herding: Evidence from the European Financial Crisis

Posted: 21 Jan 2016

See all articles by Emilios C. Galariotis

Emilios C. Galariotis

Audencia Business School ; Audencia Nantes School of Management

Styliani Iris Krokida

Athens University of Economics and Business - Department of Accounting and Finance

Spyros I. Spyrou

Athens University of Economics and Business - Department of Accounting and Finance

Date Written: January 20, 2016

Abstract

During the recent financial crisis, numerous EU officials, market participants and the media suggested that irrational herding was a key factor for the financial turmoil and the soaring yield spreads. In this paper we test for evidence of herd behavior in European government bond prices and, overall, we find no evidence of investor herding either before or after the EU crisis. We do find, however, in an original contribution to the bond market literature, strong evidence that during the EU crisis period, macroeconomic information announcements induced bond market investor herding; a finding that confirms the notion of' 'spurious' herding proposed by Bikhchandani and Sharma (2001) for bond markets. Further tests reinforce this finding and also indicate the existence of herding spill-over effects.

Keywords: Herding, Bond Markets, Financial Crisis

JEL Classification: G12, G14, G15

Suggested Citation

Galariotis, Emilios C. and Krokida, Styliani-Iris and Spyrou, Spyros I., Bond Market Investor Herding: Evidence from the European Financial Crisis (January 20, 2016). International Review of Financial Analysis, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2718851

Emilios C. Galariotis

Audencia Business School ( email )

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312
France

HOME PAGE: http://faculte-recherche.audencia.com/en/faculty/faculty-member-cvs/emilios-galariotis/

Audencia Nantes School of Management ( email )

France

HOME PAGE: http://faculte-recherche.audencia.com/en/faculty/faculty-member-cvs/emilios-galariotis/

Styliani-Iris Krokida

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

Spyros I. Spyrou (Contact Author)

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

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