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Herd Behaviour, Illiquidity and Extreme Market States

Author

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  • Vasileios Kallinterakis

    (Vasileios Kallinterakis (corresponding author), Department of Economics and Finance, University of Durham, 23/26 Old Elvet, Durham DH1 3HY, United Kingdom. E-mail: vasileios.kallinterakis@durham.ac.uk)

  • Nomana Munir

    (Nomana Munir, Department of Economics and Finance, University of Durham, 23/26 Old Elvet, Durham DH1 3HY, United Kingdom. E-mail: nomana.munir@durham.ac.uk)

  • Mirjana Radovic-Markovic

    (Mirjana Radovic-Markovic, Head of Department of Economic Researches, Institute of Economic Sciences, Zmaj Jovina 12, Belgrade, Republic of Serbia. E-mail: mirjana.radovic@ien.bg.ac.rs)

Abstract

A large amount of studies have attempted to trace the presence of herding during extreme periods at the cross-sectional level by associating herding with the reduction in the cross-sectional dispersion of returns around the market average. In this article we address the issue of whether the estimation of herding on the premises of such frameworks is robust to the thin trading bias whose presence is particularly prevalent in emerging markets. Our study is undertaken in the context of the Banja Luka Stock Exchange, which is one of the world’s most recently established markets. Results indicate that herding is insignificant during extreme return periods with its insignificance persisting even after controlling for thin trading.

Suggested Citation

  • Vasileios Kallinterakis & Nomana Munir & Mirjana Radovic-Markovic, 2010. "Herd Behaviour, Illiquidity and Extreme Market States," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 9(3), pages 305-324, December.
  • Handle: RePEc:sae:emffin:v:9:y:2010:i:3:p:305-324
    DOI: 10.1177/097265271000900303
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    References listed on IDEAS

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    1. Shah, Mohay Ud Din & Shah, Attaullah & Khan, Safi Ullah, 2017. "Herding behavior in the Pakistan stock exchange: Some new insights," Research in International Business and Finance, Elsevier, vol. 42(C), pages 865-873.
    2. Chris Grose, 2013. "Diversification Opportunities through Fixed-income Managed Funds in Eastern Europe," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 12(1), pages 1-29, April.
    3. 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.
    4. Charilaos Mertzanis & Noha Allam, 2018. "Political Instability and Herding Behaviour: Evidence from Egypt’s Stock Market," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(1), pages 29-59, April.

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    More about this item

    Keywords

    JEL Classification: G10; JEL Classification: G15; Herding; thin trading; extreme markets; Banja Luka;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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