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Confucius and Herding Behaviour in the Stock Markets in China and Taiwan

Author

Listed:
  • Batmunkh John Munkh-Ulzii

    (Department of International Relations, National University of Mongolia, Ulaanbaatar 14200, Mongolia)

  • Michael McAleer

    (Department of Finance, Asia University, Taichung 41354, Taiwan
    Discipline of Business Analytics, University of Sydney Business School, Sydney, NSW 2006, Australia
    Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam, 3000 Rotterdam, The Netherlands
    Department of Economic Analysis and ICAE, Complutense University of Madrid, 28040 Madrid, Spain)

  • Massoud Moslehpour

    (Department of Business Administration, Asia University, Taichung 41354, Taiwan)

  • Wing-Keung Wong

    (Department of Finance, Asia University, Taichung 41354, Taiwan)

Abstract

It has been argued in the literature that financial markets with a Confucian background tend to exhibit herding behaviour, or correlated behavioural patterns in individuals. This paper applies the return dispersion model to investigate financial herding behaviour by examining index returns from the stock markets in China and Taiwan. The sample period is from 1 January 1999 to 31 December 2014, and the data were obtained from Thomson Reuters Datastream. Although the sample period finishes in 2014, the data are more than sufficient to test the three hypotheses relating to the stock markets in China and Taiwan, both of which have Confucian cultures. The empirical results demonstrate significant herding behaviour under both general and specified markets conditions, including bull and bear markets, and high-low trading volume states. This paper contributes to the herding literature by examining three different hypotheses regarding the stock markets in China and Taiwan, and showing that there is empirical support for these hypotheses.

Suggested Citation

  • Batmunkh John Munkh-Ulzii & Michael McAleer & Massoud Moslehpour & Wing-Keung Wong, 2018. "Confucius and Herding Behaviour in the Stock Markets in China and Taiwan," Sustainability, MDPI, vol. 10(12), pages 1-16, November.
    • Handle: RePEc:gam:jsusta:v:10:y:2018:i:12:p:4413-:d:185584
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