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Testing Sectoral Herding in the Jordanian Stock Market

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  • Mohammad K. Elshqirat

Abstract

The main purposes of this quantitative study were to examine the existence of herding behavior among investors in Amman stock exchange (ASE) at market and sector level in addition to testing the behavior during the market rising and falling and examining whether the behavior existence is different before and after the global financial crisis of 2008. The theoretical base of the study was the behavioral finance which assumes that investors are not completely rational and they may follow others when taking investment decisions. The main enquires of the study were about the existence of herding in the Jordanian market, whether it's affected by conditions of market rising and falling, and whether it's affected by the financial crisis. A quantitative design was employed to achieve the purposes of this study which covers the period 2000 - 2018. Data were obtained from ASE website and analyzed using ordinary least squares method. The results indicated that herding is absent in the Jordanian market if tested at market level while it exists in services and industrial sectors if tested at sectors level. The financial crisis did not affect the presence of herding at market level while it did affect the behavior in services and industrial sectors. Moreover, the results revealed that market condition of rising and falling affected herding at market level but not at sectors level. It is also concluded that the global financial crisis changed the presence of herding behavior during conditions of rising and falling in market and in each sector.

Suggested Citation

  • Mohammad K. Elshqirat, 2019. "Testing Sectoral Herding in the Jordanian Stock Market," International Business Research, Canadian Center of Science and Education, vol. 12(8), pages 88-106, August.
    • Handle: RePEc:ibn:ibrjnl:v:12:y:2019:i:8:p:88-106
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    References listed on IDEAS

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    1. Andrikopoulos, Panagiotis & Gregoriou, Greg N. & Kallinterakis, Vasileios (ed.), 2016. "Handbook of Frontier Markets," Elsevier Monographs, Elsevier, edition 1, number 9780128037768.
    2. Andrikopoulos, Panagiotis & Gregoriou, Greg N. & Kallinterakis, Vasileios Bill (ed.), 2016. "Handbook of Frontier Markets," Elsevier Monographs, Elsevier, edition 1, number 9780128092002.
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    4. Phil Holmes & Vasileios Kallinterakis & M P Leite Ferreira, 2013. "Herding in a Concentrated Market: a Question of Intent," European Financial Management, European Financial Management Association, vol. 19(3), pages 497-520, June.
    5. Li, Wei & Rhee, Ghon & Wang, Steven Shuye, 2017. "Differences in herding: Individual vs. institutional investors," Pacific-Basin Finance Journal, Elsevier, vol. 45(C), pages 174-185.
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    7. Hao Fang & Yang-Cheng Lu & Hwey-Yun Yau & Yen-Hsien Lee, 2017. "Causes and Impacts of Foreign and Domestic Institutional Investors’ Herding in the Taiwan Stock Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(4), pages 727-745, April.
    8. Rıza Demirer & Huacheng Zhang, 2019. "Do firm characteristics matter in explaining the herding effect on returns?," Review of Financial Economics, John Wiley & Sons, vol. 37(2), pages 256-271, April.
    9. Gavriilidis, Konstantinos & Kallinterakis, Vasileios & Tsalavoutas, Ioannis, 2016. "Investor mood, herding and the Ramadan effect," Journal of Economic Behavior & Organization, Elsevier, vol. 132(S), pages 23-38.
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    Cited by:

    1. 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.

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    More about this item

    Keywords

    Amman stock exchange; behavioral finance; financial crisis; herding; market falling; market rising; sectoral herding;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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