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Do Oil Prices and Financial Indicators Drive the Herding Behavior in Commodity Markets?

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  • Mouna Youssef

Abstract

This study tests the presence of herding behavior in commodity markets (energy, industrial metals, precious metals, grains food, and livestock) from a constant and time-varying perspective. Additionally, we investigate whether oil prices and major financial indicators drive herding in these markets. Using daily data over the period 2003–2017, the constant model based on the cross-sectional absolute deviation model suggests no herding in any of the commodity sectors. However, using a time-varying approach, results reveal the existence of herding in almost all sectors, mainly during and after the global financial crisis. Furthermore, the oil price contributes significantly to herding among investors in the energy sector. We also find that the major exchange rate contributes to herding only for industrial metals sectors during a very limited period. Moreover, the US stock market also has a limited contribution to herding in the energy and the industrial metals sectors.

Suggested Citation

  • Mouna Youssef, 2022. "Do Oil Prices and Financial Indicators Drive the Herding Behavior in Commodity Markets?," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 23(1), pages 58-72, January.
    • Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:1:p:58-72
    DOI: 10.1080/15427560.2020.1841193
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    Cited by:

    1. Ren, Boru & Lucey, Brian, 2023. "Herding in the Chinese renewable energy market: Evidence from a bootstrapping time-varying coefficient autoregressive model," Energy Economics, Elsevier, vol. 119(C).
    2. Mouna Youssef & Khaled Mokni, 2023. "Herding behavior in stock markets of oil-importing and oil-exporting countries: the role of oil price," Journal of Asset Management, Palgrave Macmillan, vol. 24(1), pages 44-58, February.
    3. Cui, Jinxin & Maghyereh, Aktham, 2023. "Higher-order moment risk connectedness and optimal investment strategies between international oil and commodity futures markets: Insights from the COVID-19 pandemic and Russia-Ukraine conflict," International Review of Financial Analysis, Elsevier, vol. 86(C).

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