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Is anti-herding behavior spurious?

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Listed:
  • Stavroyiannis, Stavros
  • Babalos, Vassilios
  • Bekiros, Stelios
  • Lahmiri, Salim

Abstract

Herding behavior has been in the epicenter of a heated debate over the past three decades across traditional and alternative asset markets. Establishing the existence of herding relies on a standard regression-based testing procedure. Employing Monte Carlo simulations we show that spurious anti-herding behavior might emerge even if the series are random and totally uncorrelated, provided that the residuals of the model fail to conform to some of the assumptions of standard linear regression. The simulations from a t-student distribution are examined as a function of the degrees of freedom, the length of the simulations, and the number of series.

Suggested Citation

  • Stavroyiannis, Stavros & Babalos, Vassilios & Bekiros, Stelios & Lahmiri, Salim, 2019. "Is anti-herding behavior spurious?," Finance Research Letters, Elsevier, vol. 29(C), pages 379-383.
    • Handle: RePEc:eee:finlet:v:29:y:2019:i:c:p:379-383
    DOI: 10.1016/j.frl.2018.09.003
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    References listed on IDEAS

    as
    1. 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.
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    4. Stavros Stavroyiannis & Vassilios Babalos, 2017. "Herding, Faith-Based Investments and the Global Financial Crisis: Empirical Evidence From Static and Dynamic Models," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 18(4), pages 478-489, October.
    5. Vassilios Babalos & Stavros Stavroyiannis, 2015. "Herding, anti-herding behaviour in metal commodities futures: a novel portfolio-based approach," Applied Economics, Taylor & Francis Journals, vol. 47(46), pages 4952-4966, October.
    6. Pierdzioch, Christian & Rülke, Jan-Christoph & Stadtmann, Georg, 2013. "Forecasting metal prices: Do forecasters herd?," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 150-158.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Spurious anti-herding; Multivariate Monte Carlo; Statistical significance;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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