Herding and Equity Market Liquidity: Evidence from Vietnam

Abstract

This paper focuses on investigating the relation between herding and liquidity in Vietnam stock market, an issue which is paid less intention in previous studies. We use stock prices and trading volume over the period from 2005 to 2017 as the data set to measure herding and liquidity, respectively. The finding indicates the presence of herd behavior in Vietnam stock market during the period studied. Moreover, the results reveal significant evidence of herding asymmetry conditional on the average market liquidity but more pronounced for high and medium liquidity stocks. In addition, there is empirical evidence supporting the two-way directional effect of herding and market liquidity. The results also robust when we split the data into three sub-periods including pre-crisis, during crisis and post-crisis periods.

Keywords: emerging market, herding, market liquidity, financial crisis

JEL Classification: G02, G10, G12, G15