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Herding Behavior in Developed, Emerging, and Frontier European Stock Markets during COVID-19 Pandemic

Author

Listed:
  • Siniša Bogdan

    (Faculty of Tourism and Hospitality Management, University of Rijeka, 51410 Opatija, Croatia)

  • Natali Suštar

    (Faculty of Tourism and Hospitality Management, University of Rijeka, 51410 Opatija, Croatia)

  • Bojana Olgić Draženović

    (Faculty of Economics and Business, University of Rijeka, 51000 Rijeka, Croatia)

Abstract

The behavior of market participants often does not rely on market signals, but replicates the investment decisions of other parties. The convergence of their investment behavior leads to the emergence of herd behavior with negative implications for financial stability. Moreover, this phenomenon may be even more pronounced in times of crisis. Although herding is an interesting topic which invites the interest of academic researchers, it still has not been sufficiently studied in terms of comparing the herd effect between differently developed stock markets. The first objective of this research was to determine the herd behavior during the COVID-19 pandemic using static and rolling regression analysis. The second objective was to investigate whether the herd behavior was triggered by the pandemic, while the third objective was to compare the differences in herd behavior between differently developed European stock markets. The results show that this phenomenon is most pronounced in emerging markets, followed by frontier markets and developed markets. Therefore, the results of this study are of particular importance for individual and institutional investors to achieve efficient risk diversification and for financial authorities to establish rules and avoid an increase in herd behavior.

Suggested Citation

  • Siniša Bogdan & Natali Suštar & Bojana Olgić Draženović, 2022. "Herding Behavior in Developed, Emerging, and Frontier European Stock Markets during COVID-19 Pandemic," JRFM, MDPI, vol. 15(9), pages 1-12, September.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:9:p:400-:d:911349
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    References listed on IDEAS

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    2. Richard T. Ampofo & Eric N. Aidoo & Bernard O. Ntiamoah & Ophelia Frimpong & Daniel Sasu, 2023. "An empirical investigation of COVID-19 effects on herding behaviour in USA and UK stock markets using a quantile regression approach," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(2), pages 517-540, June.
    3. Singh Sanjeet & Madaan Geetika & Singh Amrinder & Swapna H.R. & Asthana Satish Kumar, 2025. "Behavioural Biases and Investment Decision Making: The Mediating Role of Risk Perception, according to Evidence from the Indian Stock Market," Folia Oeconomica Stetinensia, Sciendo, vol. 25(2), pages 236-261.
    4. Ghaemi Asl, Mahdi & Ben Jabeur, Sami, 2024. "Could the Russia-Ukraine war stir up the persistent memory of interconnectivity among Islamic equity markets, energy commodities, and environmental factors?," Research in International Business and Finance, Elsevier, vol. 69(C).
    5. Krishnamoorthy Charith & A. A. Azeez, 2025. "Exploring Herding Instincts Through the Lens of Adaptive Market Hypothesis: Insights from a Frontier Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 32(4), pages 1211-1241, December.
    6. Naveed Jan & Waheed Ullah Shah & Magdalena Radulescu & Branimir Kalas, 2026. "Financial stability and investor behavior amid climate and COVID-19 uncertainties: evidence from Asian emerging markets," Risk Management, Palgrave Macmillan, vol. 28(1), pages 1-23, February.
    7. Renata Legenzova & Gintarė Leck&# & Justė Juknevičiūtė, 2025. "Do Global Disruptive Events Induce Herding Behaviour during Upward and Downward Market Movements? The Evidence from Nordic and Baltic Stock Markets," Central European Business Review, Prague University of Economics and Business, vol. 2025(1), pages 57-73.

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