Herding Spillover among the Stock Markets: Pakistan & China Covering Covid-19 and Its Repercussions

Raja Mazhar Hameed, Abdul Rafae Mazhar Raja and Nida Zahid
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Raja Mazhar Hameed: National Book Foundation, Islamabad, Pakistan
Abdul Rafae Mazhar Raja: Management Sciences Department, National University of Computer and Emerging Sciences, Islamabad, Pakistan
Nida Zahid: Management Sciences Department, Bahria University Islamabad, Pakistan

Journal of Policy Research (JPR), 2023, vol. 9, issue 2, 257-267

Abstract: Herding behavior, a phenomenon known to exist in stock markets, where investors tend to mimic each other instead of using their own rational. Such an anomaly therefore leads the market to inefficiency as well as volatility. Hence it is crucial that, from time to time this phenomenon should be investigated in order to see where a certain market stands in terms of it performance in context to its efficiency. This study consists on investigating herding behavior and herding spillovers from one stock market to another, particularly in context to the Chinese and Pakistani stock markets. The data includes top 100 firms’ daily returns from the Pakistani stock exchange and the Shanghai stock exchange. Cross sectional absolute deviation is calculated using Christie and Huang method to test herd formation. Based on running linear regression models, the results are further discussed in order to see how the stock markets have been performing from the time period of 1st January, 2010 to 31st December, 2020. Alongside herding behavior and herding spillover would also be investigated during the time of Covid-19 from 1st January, 2010 till 31st December, 2020.

Keywords: Herding Behavior; Herding Spillover; Herd Formation; Covid-19; Stock Markets (search for similar items in EconPapers)
Date: 2023
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