Herding in Frontier Markets: Evidence from African Stock Exchanges

Citation: Guney, Y., Kallinterakis, V. and Komba, G. Herding in frontier markets: evidence from African stock exchanges. Journal of International Financial Markets, Institutions & Money, 2017.

43 Pages Posted: 29 Oct 2016

See all articles by Yilmaz Guney

Yilmaz Guney

University of Hull

Vasileios Kallinterakis

University of Liverpool - Management School (ULMS)

Gabriel Komba

Mzumbe University, School of Business

Date Written: October 28, 2016

Abstract

We investigate herding in eight African frontier stock markets between January 2002 and July 2015, given the limited evidence on herding in frontier markets. Herding appears significant throughout the 2002-2015 period for all markets, with smaller stocks found to enhance its magnitude. Herding entails no clear asymmetries conditional on market performance; conversely, it appears notably asymmetric when conditioned on market volatility, as it is significant (or stronger) mainly during low volatility days, without this pattern, however, surviving when accounting for the 2007-2009 crisis. The US and South African markets motivate herding on a small number of occasions only, while the return dynamics of a regional economic initiative’s member-markets are found to induce herding in each other very rarely, thus demonstrating that investors’ behaviour in markets with low integration in the international financial system is not significantly affected by non-domestic factors.

Keywords: herding; frontier markets; asymmetric behaviour; Africa

JEL Classification: G01; G02; G15

Suggested Citation

Guney, Yilmaz and Kallinterakis, Vasileios and Komba, Gabriel, Herding in Frontier Markets: Evidence from African Stock Exchanges (October 28, 2016). Citation: Guney, Y., Kallinterakis, V. and Komba, G. Herding in frontier markets: evidence from African stock exchanges. Journal of International Financial Markets, Institutions & Money, 2017.. Available at SSRN: https://ssrn.com/abstract=2860897

Yilmaz Guney

University of Hull ( email )

Hull, HU6 7RX
United Kingdom

HOME PAGE: http://https://www.hull.ac.uk/faculties/fblp/hubs.aspx

Vasileios Kallinterakis (Contact Author)

University of Liverpool - Management School (ULMS) ( email )

Chatham Street
Liverpool, L69 7ZH
United Kingdom

Gabriel Komba

Mzumbe University, School of Business ( email )

P.O.Box 6, Mzumbe
Morogoro
Tanzania

HOME PAGE: http://www.mzumbe.ac.tz

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