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Herding Behavior in the Stock Market: An Empirical Analysis of the Egyptian Exchange

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Author Info

  • Dalia El-Shiaty

    ()
    (Faculty of Management Technology, The German University in Cairo)

  • Ahmed Abdelmotelib Badawi

    (American University of the Middle East)

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    Abstract

    This paper examines herding behavior in the Egyptian stock market using the CH model developed by Christie and Huang (1995) and the CCK model developed by Chang et al. (2000). We use daily returns data of the 20 most traded stocks in the Egyptian Exchange in addition to the daily returns of the market index EGX 100 during a period of five years from January 2006 till December 2010. The paper is an attempt towards thorough examination of herding behavior in the Middle East and Africa region which has been investigated only as an entire region and not disaggregated into the specific countries. The results show that there is no herding present in the Egyptian stock market.

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    File URL: http://mgt.guc.edu.eg/wpapers/037elshiaty_badawi2014.pdf
    File Function: First version, 2014
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    Bibliographic Info

    Paper provided by The German University in Cairo, Faculty of Management Technology in its series Working Papers with number 37.

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    Length: 17 pages
    Date of creation: Jan 2014
    Date of revision:
    Handle: RePEc:guc:wpaper:37

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    Web page: http://mgt.guc.edu.eg/economics/RePEc/guc/
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    Keywords: Herd behavior; Egyptian stock market; behavioral finance;

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    1. Amil Dasgupta & Andrea Prat & Michela Verardo, 2011. "The Price Impact of Institutional Herding," Review of Financial Studies, Society for Financial Studies, vol. 24(3), pages 892-925.
    2. Hyuk Choe & Bong-Chan Kho & Rene M. Stulz, 1998. "Do Foreign Investors Destabilize Stock Markets? The Korean Experience in 1997," NBER Working Papers 6661, National Bureau of Economic Research, Inc.
    3. Woochan Kim & Shang-Jin Wei, 1999. "Foreign Portfolio Investors Before and During a Crisis," NBER Working Papers 6968, National Bureau of Economic Research, Inc.
    4. Peter M. DeMarzo & Ron Kaniel & Ilan Kremer, 2008. "Relative Wealth Concerns and Financial Bubbles," Review of Financial Studies, Society for Financial Studies, vol. 21(1), pages 19-50, January.
    5. Sam Wylie, 2005. "Fund Manager Herding: A Test of the Accuracy of Empirical Results Using U.K. Data," The Journal of Business, University of Chicago Press, vol. 78(1), pages 381-403, January.
    6. John R. Nofsinger & Richard W. Sias, 1999. "Herding and Feedback Trading by Institutional and Individual Investors," Journal of Finance, American Finance Association, vol. 54(6), pages 2263-2295, December.
    7. Sunil Sharma & Sushil Bikhchandani, 2000. "Herd Behavior in Financial Markets: A Review," IMF Working Papers 00/48, International Monetary Fund.
    8. Russ Wermers, 1999. "Mutual Fund Herding and the Impact on Stock Prices," Journal of Finance, American Finance Association, vol. 54(2), pages 581-622, 04.
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