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Testing for herding using different return definitions: a comparison between simple and logarithmic returns

Author

Listed:
  • Junkai Wang

    (University of Hull)

  • Robert Hudson

    (University of Hull)

Abstract

We outline theoretically why different return measures (simple or logarithmic) may affect tests for herding. Comprehensive empirical tests using data from many major world financial markets confirm that different returns measures do frequently lead to different conclusions about the presence of herding.

Suggested Citation

  • Junkai Wang & Robert Hudson, 2023. "Testing for herding using different return definitions: a comparison between simple and logarithmic returns," Economics Bulletin, AccessEcon, vol. 43(2), pages 1070-1080.
    • Handle: RePEc:ebl:ecbull:eb-22-00766
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    References listed on IDEAS

    as
    1. Economou, Fotini & Kostakis, Alexandros & Philippas, Nikolaos, 2011. "Cross-country effects in herding behaviour: Evidence from four south European markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(3), pages 443-460, July.
    2. Chang, Eric C. & Cheng, Joseph W. & Khorana, Ajay, 2000. "An examination of herd behavior in equity markets: An international perspective," Journal of Banking & Finance, Elsevier, vol. 24(10), pages 1651-1679, October.
    3. Galariotis, Emilios C. & Krokida, Styliani-Iris & Spyrou, Spyros I., 2016. "Herd behavior and equity market liquidity: Evidence from major markets," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 140-149.
    4. Hudson, Robert S. & Gregoriou, Andros, 2015. "Calculating and comparing security returns is harder than you think: A comparison between logarithmic and simple returns," International Review of Financial Analysis, Elsevier, vol. 38(C), pages 151-162.
    5. Demirer, RIza & Kutan, Ali M., 2006. "Does herding behavior exist in Chinese stock markets?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(2), pages 123-142, April.
    6. Chiang, Thomas C. & Li, Jiandong & Tan, Lin, 2010. "Empirical investigation of herding behavior in Chinese stock markets: Evidence from quantile regression analysis," Global Finance Journal, Elsevier, vol. 21(1), pages 111-124.
    7. Arjoon, Vaalmikki & Bhatnagar, Chandra Shekhar & Ramlakhan, Prakash, 2020. "Herding in the Singapore stock Exchange," Journal of Economics and Business, Elsevier, vol. 109(C).
    8. Clements, Adam & Hurn, Stan & Shi, Shuping, 2017. "An empirical investigation of herding in the U.S. stock market," Economic Modelling, Elsevier, vol. 67(C), pages 184-192.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Herding; Returns; Logarithmic; Simple; CCK test; CSAD; Stock Markets.;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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    Access and download statistics

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