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Investors’ herd behavior related to the pandemic-risk reflected on the GCC stock markets

Author

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  • Marwan Mohamed Abdeldayem

    (Cairo University, Egypt and College of Administrative Sciences, Applied Science University (ASU), P.O Box 5055 Manama, Kingdom of Bahrain)

  • Saeed Hameed Al Dulaimi

    (College of Administrative Sciences, Applied Science University (ASU), P.O Box 5055 Manama Kingdom of Bahrain)

Abstract

The purpose of this study is to examine the causal association between expectations of pandemic risk and herding behavior. The study was undertaken in two stages. First, it was felt necessary to obtain a broad overview of the effect of the pandemic related risk of COVID-19 on investors’ herding in the GCC. This was achieved by analyzing secondary data (i.e. daily historic prices on five GCC country market indices). In analyzing the secondary data, the study follows Christie and Huang (1995) and employs the cross-sectional standard deviation (CSSD) of returns to detect investors’ herding behavior. Second, in an attempt to obtain a more precise understanding of the impact of pandemic related risk, a questionnaire survey was distributed and collected from 318 investors from the GCC stock markets. A confirmatory factor analysis (CFA) was also used as the primary analysis between the two variables: i.e. expectations of pandemic risk and herding behavior. The findings reveal that expectations of pandemic risk have a significant positive impact on the herding behavior in the GCC stock markets during the coronavirus crisis in the first quarter of 2020. Finally, the results of this study are robust to a range of model specifications.

Suggested Citation

  • Marwan Mohamed Abdeldayem & Saeed Hameed Al Dulaimi, 2020. "Investors’ herd behavior related to the pandemic-risk reflected on the GCC stock markets," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 38(2), pages 563-584.
    • Handle: RePEc:rfe:zbefri:v:38:y:2020:i:2:p:563-584
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    References listed on IDEAS

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    More about this item

    Keywords

    COVID-19; GCC Stock Markets; Investor Herding; Pandemic-Risk; Cross-Sectional Standard Deviation (CSSD); Confirmatory Factor Analysis (CFA);
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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