Does Speculation in the Oil Market Drive Investor Herding in Net Exporting Nations?

34 Pages Posted: 6 Apr 2016

See all articles by Mehmet Balcilar

Mehmet Balcilar

Eastern Mediterranean University

Riza Demirer

Southern Illinois University Edwardsville - Department of Economics & Finance; Economic Research Forum (ERF)

Talat Ulussever

King Fahd University of Petroleum & Minerals (KFUPM) - Department of Finance & Economics (FINEC)

Date Written: January 29, 2016

Abstract

This paper examines whether speculation in the global oil market contributes to herd behavior in the stock markets of net exporting nations. Using firm level data from the Gulf Arab stock markets, we show that investors display herd behavior during periods of high volatility while anti-herding is prevalent during calm markets. Anti-herding in the stock market is also found to be positively related to speculative activities in the global oil market as investors use signals from the oil market in their trades by trading away from the market consensus. We argue that traders take the speculative signals from the oil market as a sign of positive expectations and try to generate superior profits by going against the crowd in their local market.

Keywords: Herd behavior, Equity return dispersion, Crude Oil, Speculative ratio, Markov-switching

JEL Classification: C32, G14, G15

Suggested Citation

Balcilar, Mehmet and Demirer, Riza and Ulussever, Talat, Does Speculation in the Oil Market Drive Investor Herding in Net Exporting Nations? (January 29, 2016). Available at SSRN: https://ssrn.com/abstract=2756997 or http://dx.doi.org/10.2139/ssrn.2756997

Mehmet Balcilar (Contact Author)

Eastern Mediterranean University ( email )

Gazimagusa
Turkey

HOME PAGE: http://www.mbalcilar.net

Riza Demirer

Southern Illinois University Edwardsville - Department of Economics & Finance ( email )

Department of Economics & Finance
Alumni Hall 3144
Edwardsville, IL 62026-1102
United States
(618) 650-2939 (Phone)
(618) 650-3047 (Fax)

HOME PAGE: http://www.siue.edu/~rdemire/

Economic Research Forum (ERF)

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Cairo, Cairo
Egypt

HOME PAGE: http://erf.org.eg/affiliates/riza-demirer-3/

Talat Ulussever

King Fahd University of Petroleum & Minerals (KFUPM) - Department of Finance & Economics (FINEC) ( email )

United States

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