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International herding: Does it differ across sectors?

  • Gębka, Bartosz
  • Wohar, Mark E.

This paper investigates the existence of herding in the global equity market. We apply a methodology which utilises cross-country dispersion in index returns. An analysis of national indices world-wide unveils virtually no instances of global information cascades, as price patterns largely adhere to the predictions of the rational pricing models. However, some sector-specific indices reveal price patterns indicative of traders’ irrationality, especially in basic materials, consumer services, and oil and gas. This can be driven by a group of investors following each other in and out of markets, overconfidence, or excessive flight to quality. These irrational patterns decline over time.

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Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 23 (2013)
Issue (Month): C ()
Pages: 55-84

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Handle: RePEc:eee:intfin:v:23:y:2013:i:c:p:55-84
Contact details of provider: Web page: http://www.elsevier.com/locate/intfin

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