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Does speculation in the oil market drive investor herding in net exporting nations?

Author

Listed:
  • Mehmet Balcilar

    (Department of Economics, Eastern Mediterranean University)

  • Riza Demirer

    (Department of Economics and Finanace, Southern Illinois University Edwardsville)

  • Talat Ulussever

    (Department of Economics and Finance, College of Industrial Management,King Fahd University of Petroleum & Minerals)

Abstract

This paper examines whether speculation in the global oil market contributes to herd behavior in the stock markets of net exporting nations. Using firm level data from the Gulf Arab stock markets, we show that investors display herd behavior during periods of high volatility while anti-herding is prevalent during calm markets. Anti-herding in the stock market is also found to be positively related to speculative activities in the global oil market as investors use signals from the oil market in their trades by trading away from the market consensus. We argue that traders take the speculative signals from the oil market as a sign of positive expectations and try to generate superior profits by going against the crowd in their local market.

Suggested Citation

  • Mehmet Balcilar & Riza Demirer & Talat Ulussever, 2016. "Does speculation in the oil market drive investor herding in net exporting nations?," Working Papers 15-29, Eastern Mediterranean University, Department of Economics.
    • Handle: RePEc:emu:wpaper:15-29.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Muhammad Yasir & Sitara Afzal & Khalid Latif & Ghulam Mujtaba Chaudhary & Nazish Yameen Malik & Farhan Shahzad & Oh-young Song, 2020. "An Efficient Deep Learning Based Model to Predict Interest Rate Using Twitter Sentiment," Sustainability, MDPI, vol. 12(4), pages 1-16, February.

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    More about this item

    Keywords

    Herd behavior; Equity return dispersion; Crude Oil; Speculative ratio; Markov switching.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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