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Animal Behavior in Capital markets: Herding formation dynamics, trading volume, and the role of COVID-19 pandemic

Author

Listed:
  • Christos Alexakis

    (ESC Rennes School of Business - ESC [Rennes] - ESC Rennes School of Business)

  • Antonios Chantziaras

    (Durham University Business School)

  • Fotini Economou

    (Greece and Open University of Cyprus)

  • Konstantinos Eleftheriou

    (University of Piraeus)

  • Christos Grose

    (International Hellenic University)

Abstract

This paper provides new evidence on herding behavior. Using daily frequency data for 336 US listed firms over a five-year period, we investigate three important elements of financial herding behavior. First, trading volume, representing market interest, as a significant variable in capital markets apart from stock prices. Second, herding dynamics since herding formation is a dynamic process. Third, the reaction of possible financial herding to exogenous events-threats, as we use the pandemic event in order to investigate a market under stress. Even though the benchmark herding model used does not provide evidence of herding behavior, our results verify the significance of the above herding elements. We also find that trading volume and positive changes in trading volume result in increased cross-sectional absolute deviation (CSAD). Most importantly, we find that herding behavior is evident during the COVID-19 pandemic confirming that investors tend to herd during major crisis periods.

Suggested Citation

  • Christos Alexakis & Antonios Chantziaras & Fotini Economou & Konstantinos Eleftheriou & Christos Grose, 2023. "Animal Behavior in Capital markets: Herding formation dynamics, trading volume, and the role of COVID-19 pandemic," Post-Print hal-04102932, HAL.
  • Handle: RePEc:hal:journl:hal-04102932
    DOI: 10.1016/j.najef.2023.101946
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    More about this item

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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