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Sentimental Herding: The Role of Regional and Global Shocks in Egyptian and Saudi Stock Markets

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  • Ali GÜVERCİN

Abstract

In this study, the existence of market-wide herding for Egypt and Saudi stock markets is investigated using state-space methodology developed by Hwang and Salmon (2004). The objective is not just to provide evidence for herding, but also evaluate the effect of regional and global shocks on herding behavior for these markets. Results show that herding exists only in Egypt. Moreover, for herd parameter in Egypt, mortgage crisis and Egyptian military takeover are the only significant factors. As expected, these factors cause fading effect on herd parameter, strengthening adverse herding. Contrary to expected, oil return or oil return volatility has no impact on herd parameter.

Suggested Citation

  • Ali GÜVERCİN, 2016. "Sentimental Herding: The Role of Regional and Global Shocks in Egyptian and Saudi Stock Markets," Sosyoekonomi Journal, Sosyoekonomi Society, issue 24(27).
    • Handle: RePEc:sos:sosjrn:160102
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    References listed on IDEAS

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    1. Mehmet Balcilar & Riza Demirer & Shawkat Hammoudeh & Ahmed Khalifa, 2013. "Do Global Shocks Drive Investor Herds in Oil-Rich Frontier Markets?," Working Papers 819, Economic Research Forum, revised Dec 2013.
    2. 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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    6. Sushil Bikhchandani & Sunil Sharma, 2001. "Herd Behavior in Financial Markets," IMF Staff Papers, Palgrave Macmillan, vol. 47(3), pages 1-1.
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    10. Balcilar, Mehmet & Demirer, Rıza & Hammoudeh, Shawkat, 2013. "Investor herds and regime-switching: Evidence from Gulf Arab stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 295-321.
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    More about this item

    Keywords

    Sentimental Herding; State-Space Model; Cross-Sectional Volatility; Emerging Market.;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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