Herding Dynamics in Exchange Groups: Evidence from Euronext
Posted: 10 Jun 2016
Date Written: November 26, 2014
This study investigates in the context of the Euronext, whether joining an exchange group affects herding in the group’s member-markets and if this effect persists when accounting for various domestic and international market states, the dynamics of the group’s member-markets and the outbreak of financial crises. We find that herding is significant post-merger in all four constituent equity markets (Belgium, France, the Netherlands and Portugal) of the Euronext, with herding in Portugal being significant (yet less strong) pre-merger as well. These results are robust when controlling for various domestic and international market states, as well as the dynamics of the group’s markets. The period following the outbreak of the euro-zone sovereign debt crisis produces significant herding in Belgium, the Netherlands and Portugal, with this herding being motivated by the dynamics of the group’s two largest markets (France and the Netherlands).
Keywords: Herding; exchange groups; Euronext; euro-zone sovereign debt crisis; market states
JEL Classification: G12, G15, G31
Suggested Citation: Suggested Citation