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Herd behavior and idiosyncratic volatility in a frontier market

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  • Vo, Xuan Vinh
  • Phan, Dang Bao Anh

Abstract

This study investigates the impact of idiosyncratic volatility on the herd behavior of individual investors in Vietnam stock market covering the period from 2005 to 2016. We employ the herding methods of Christie and Huang (1995) and Chang et al. (2000) and single factor model by Bali and Cakici (2008) to estimate the idiosyncratic volatility. Empirical results indicate that herding exists in this equity market. However, herding behavior displays distinct patterns under different stock portfolios depending on the levels of idiosyncratic volatility. The results are robust under various timeframes including pre-crisis, during crisis and post-crisis. The finding also reveals the existence of herding under particular industry.

Suggested Citation

  • Vo, Xuan Vinh & Phan, Dang Bao Anh, 2019. "Herd behavior and idiosyncratic volatility in a frontier market," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 321-330.
  • Handle: RePEc:eee:pacfin:v:53:y:2019:i:c:p:321-330
    DOI: 10.1016/j.pacfin.2018.10.005
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    References listed on IDEAS

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    More about this item

    Keywords

    Emerging market; Herding; Volatility; Vietnam;

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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