What determines the dynamics of absolute excess returns on stock markets?
In this paper, we quantify the dynamics of absolute excess returns on stock markets depending on three factors: the average of the absolute excess return, the level of the stock price, and stock market volatility. We also argue that the absolute excess return can be regarded as an empirical measure of the herding behavior of financial investors. Our empirical results for the German stock index show that the absolute excess return depends significantly on all three factors, although volatility may be seen as the strongest factor among them.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010.
"A theory of Fads, Fashion, Custom and cultural change as informational Cascades,"
Levine's Working Paper Archive
1193, David K. Levine.
- Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
- Andrea Morone, 2005.
"Financial Market in the Laboratory, an Experimental Analysis of some Stylized Facts,"
Papers on Strategic Interaction
2005-27, Max Planck Institute of Economics, Strategic Interaction Group.
- Andrea Morone, 2008. "Financial markets in the laboratory: an experimental analysis of some stylized facts," Quantitative Finance, Taylor & Francis Journals, vol. 8(5), pages 513-532.
- Hott, Christian, 2009. "Herding behavior in asset markets," Journal of Financial Stability, Elsevier, vol. 5(1), pages 35-56, January.
- Markus K Brunnermeier, 2002.
"Bubbles and Crashes,"
FMG Discussion Papers
dp401, Financial Markets Group.
- Sushil Bikhchandani & Sunil Sharma, 2001. "Herd Behavior in Financial Markets," IMF Staff Papers, Palgrave Macmillan, vol. 47(3), pages 1.
- Andreas Park & Hamid Sabourian, 2011.
"Herding and Contrarian Behavior in Financial Markets,"
Econometric Society, vol. 79(4), pages 973-1026, 07.
- Park, A. & Sabourian, H., 2009. "Herding and Contrarian Behaviour in Financial Markets," Cambridge Working Papers in Economics 0939, Faculty of Economics, University of Cambridge.
- Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
- Itzhak Venezia & Amrut Nashikkar & Zur Shapira, 2011. "Firm specific and macro herding by professional and amateur investors and their effects on market volatility," Discussion Paper Series dp586, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
- Ding, Zhuanxin & Granger, Clive W. J. & Engle, Robert F., 1993. "A long memory property of stock market returns and a new model," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 83-106, June.
- Bogaçhan Çelen & Shachar Kariv, 2004. "Distinguishing Informational Cascades from Herd Behavior in the Laboratory," American Economic Review, American Economic Association, vol. 94(3), pages 484-498, June.
- Venezia, Itzhak & Nashikkar, Amrut & Shapira, Zur, 2011. "Firm specific and macro herding by professional and amateur investors and their effects on market volatility," Journal of Banking & Finance, Elsevier, vol. 35(7), pages 1599-1609, July.
- Morone, Andrea, 2012. "A simple model of herd behavior, a comment," Economics Letters, Elsevier, vol. 114(2), pages 208-211.
- Lux, Thomas, 1995. "Herd Behaviour, Bubbles and Crashes," Economic Journal, Royal Economic Society, vol. 105(431), pages 881-96, July.
- In Ho Lee, 1998. "Market Crashes and Informational Avalanches," Review of Economic Studies, Oxford University Press, vol. 65(4), pages 741-759.
- Jeong-Ryeol Kurz-Kim, 2009. "Further evidence for the negative relationship between stock returns and volatility," Applied Economics Letters, Taylor & Francis Journals, vol. 16(13), pages 1295-1300.
- Cont, Rama & Bouchaud, Jean-Philipe, 2000. "Herd Behavior And Aggregate Fluctuations In Financial Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 4(02), pages 170-196, June.
When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:118:y:2013:i:2:p:342-346. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.