A note on the empirical test of herding: a threshold regression approach
The paper aims at investigating herding behaviour in equity market by applying an alternative econometric methodology. The paper applies the threshold test developed by Hansen  to standard herding model in order to capture a non-linear effect of extreme market movement on the trading behaviour of the participants. Using the econometric model with threshold effect, the paper finds little evidence for market-wide herding for the Indian equity market. Even in the extreme market conditions, participants appear to discriminate between different securities, as predicted by the rational asset pricing paradigm.
|Date of creation:||11 Apr 2012|
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- Hwang, Soosung & Salmon, Mark, 2004.
"Market stress and herding,"
Journal of Empirical Finance,
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