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Dynamic Common Properties of National Herd Behavior of Stock Markets

Yu-Fen Chen a

Thomas C. Chiang b

Fu-Lai Lin a

Sheng-Yung Yang c

^aDa-Yeh University, Taiwan. Corresponding: Dr. Fu-Lai Lin, email: fllin@mail.dyu.edu.tw.

^bDrexel University, USA

^cNational Chung Hsing University, Taiwan

Advances in Pacific Basin Business, Economics and Finance

ISBN: 978-1-80043-871-2, eISBN: 978-1-80043-870-5

Publication date: 22 July 2021

Abstract

This chapter examines herd behavior across national borders. A dynamic latent factor model with Gibbs sampling is used to decompose the national herd behavior into the world, regional, and country-specific components. Testing the daily data from 2000 through 2014 for 47 countries, we find that the impact of world factor on national herd behavior is short-lived. This study indicates that world and regional factors play a significant role in explaining the variations of national herd behavior, constituting 33% of the herding variability. The significance of world and regional components is likely to produce a biased herding estimator.

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Citation

Chen, Y.-F., Chiang, T.C., Lin, F.-L. and Yang, S.-Y. (2021), "Dynamic Common Properties of National Herd Behavior of Stock Markets", Lee, C.-F. and Yu, M.-T. (Ed.) Advances in Pacific Basin Business, Economics and Finance (Advances in Pacific Basin Business, Economics and Finance, Vol. 9), Emerald Publishing Limited, Leeds, pp. 175-193. https://doi.org/10.1108/S2514-465020210000009009

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Emerald Publishing Limited

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