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Bond market investor herding: Evidence from the European financial crisis

Emilios C. Galariotis, Styliani-Iris Krokida and Spyros Spyrou

International Review of Financial Analysis, 2016, vol. 48, issue C, 367-375

Abstract: During the recent financial crisis, numerous EU officials, market participants and the media suggested that irrational herding was a key factor for the financial turmoil and the soaring yield spreads. In this paper we test for evidence of herd behavior in European government bond prices and, overall, we find no evidence of investor herding either before or after the EU crisis. We do find, however, in an original contribution to the bond market literature, strong evidence that during the EU crisis period, macroeconomic information announcements induced bond market investor herding; a finding that confirms the notion of ‘spurious’ herding proposed by Bikhchandani and Sharma (2001) for bond markets. Further tests reinforce this finding and also indicate the existence of herding spill-over effects.

Keywords: Herding; Bond markets; Financial crisis (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:48:y:2016:i:c:p:367-375

DOI: 10.1016/j.irfa.2015.01.001

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