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Herd behavior in the French stock market

Author

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  • Houda Litimi

Abstract

Purpose - This paper aims to investigate the herding behavior in the French stock market and its effect on the idiosyncratic conditional volatility at a sectoral level. Design/methodology/approach - This sample covers all the listed companies in the French stock market, classified by sector, over four major crisis periods. The author modifies the cross-sectional absolute deviation (CSAD) model to include trading volume and investors sentiment as herding triggers. Furthermore, the author uses a modified GARCH model to investigate the effect of herding on conditional volatility. Findings - Herding is present in the French market during crises, and it is present in only some sectors during the entire period. The main trigger for investors to embark into a collective herding movement differs from one sector to another. Furthermore, herding behavior has an inhibiting effect on market conditional volatility. Originality/value - The author modifies the CSAD model to investigate the presence of herding in the French stock market at a sectoral level during turmoil periods. Furthermore, the particularly designed GARCH model provides new insights on the effect of herding and volume turnover on the conditional volatility.

Suggested Citation

  • Houda Litimi, 2017. "Herd behavior in the French stock market," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 16(4), pages 497-515, November.
    • Handle: RePEc:eme:rafpps:raf-11-2016-0188
    DOI: 10.1108/RAF-11-2016-0188
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    Citations

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    Cited by:

    1. Muskan Sachdeva & Ritu Lehal & Sanjay Gupta & Aashish Garg, 2021. "What make investors herd while investing in the Indian stock market? A hybrid approach," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 15(1), pages 19-37, September.
    2. Shifen Zhou & Xiaojun Liu, 2022. "Internet postings and investor herd behavior: evidence from China’s open-end fund market," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-11, December.
    3. Mohammad K. Elshqirat, 2020. "Remeasuring Sectoral Herding in the Financial Markets," International Business Research, Canadian Center of Science and Education, vol. 13(8), pages 1-1, August.
    4. Puput Tri Komalasari & Marwan Asri & Bernardinus M. Purwanto & Bowo Setiyono, 2022. "Herding behaviour in the capital market: What do we know and what is next?," Management Review Quarterly, Springer, vol. 72(3), pages 745-787, September.
    5. Hoang Viet Nguyen & Wilson Dang & Hoang Nguyen & Thi Nguyen Hong Nguyen & Thi My Nguyet Nguyen & Tuan Duong Vu & Ninh Nguyen, 2021. "How Does Environmental Interpretation Affect Psychological Well-Being? A Study Conducted in the Context of COVID-19," Sustainability, MDPI, vol. 13(15), pages 1-15, July.
    6. Yide Wang & Chao Yu & Xujie Zhao, 2023. "Does herding effect help forecast market volatility?—Evidence from the Chinese stock market," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(5), pages 1275-1290, August.
    7. Mostafa Hussein Abd-Alla, 2020. "Sentimental Herding: The Role Of Covid-19 Crisis In The Egyptian Stock Market," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 9(3), pages 9-23.

    More about this item

    Keywords

    Herding; Conditional volatility; Sectoral analysis; G14; G15;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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