Herding by corporates in the US and the Eurozone through different market conditions

Duygun, Meryem; Tunaru, Radu; Vioto, Davide

Abstract

In this study, we test the herding towards a market consensus in the main financial industries of the United States and the Eurozone equity markets. We find that herding is more likely to be present in high quantiles that reflects turbulent market conditions. This herding appears to be more pronounced during financial crisis periods and in cases of asymmetric conditions of volatility, credit deterioration, and illiquid funding. Furthermore, we provide evidence that the cross-sectional dispersion of returns throughout the domestic equity market can be partly explained by the corresponding dispersions of the financial industries. In our analysis we cover the last two main global financial crises and identify new evidence of "spurious" and "intentional" herding by corporates. Further, our results are robust when considering short-selling bans.

Citation

Duygun, M., Tunaru, R., & Vioto, D. (2021). Herding by corporates in the US and the Eurozone through different market conditions. Journal of International Money and Finance, 110, Article 102311. https://doi.org/10.1016/j.jimonfin.2020.102311

• Journal Article Type: Article
• Acceptance Date: Oct 16, 2020
• Online Publication Date: Oct 22, 2020
• Publication Date: 2021-02
• Deposit Date: Oct 20, 2020
• Publicly Available Date: Apr 23, 2022
• Journal: Journal of International Money and Finance
• Print ISSN: 0261-5606
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 110
• Article Number: 102311
• DOI: https://doi.org/10.1016/j.jimonfin.2020.102311
• Keywords: Herding behavior; Financial crisis; Fundamental information; Quantile
• Public URL: https://nottingham-repository.worktribe.com/output/4977776
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0261560620302679