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International herding: Does it differ across sectors?

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Author Info

  • Gębka, Bartosz
  • Wohar, Mark E.

Abstract

This paper investigates the existence of herding in the global equity market. We apply a methodology which utilises cross-country dispersion in index returns. An analysis of national indices world-wide unveils virtually no instances of global information cascades, as price patterns largely adhere to the predictions of the rational pricing models. However, some sector-specific indices reveal price patterns indicative of traders’ irrationality, especially in basic materials, consumer services, and oil and gas. This can be driven by a group of investors following each other in and out of markets, overconfidence, or excessive flight to quality. These irrational patterns decline over time.

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File URL: http://www.sciencedirect.com/science/article/pii/S1042443112000807
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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 23 (2013)
Issue (Month): C ()
Pages: 55-84

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Handle: RePEc:eee:intfin:v:23:y:2013:i:c:p:55-84

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Web page: http://www.elsevier.com/locate/intfin

Related research

Keywords: Herding; Financial contagion; International financial markets; Quantile regressions;

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Cited by:
  1. Gavriilidis, Konstantinos & Kallinterakis, Vasileios & Ferreira, Mario Pedro Leite, 2013. "Institutional industry herding: Intentional or spurious?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 192-214.

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