Reverse herding behavior in the Malaysian stock market: a wavelet multiple cross-correlation analysis

Yusri Yahya (), Abdul Hafizh Mohd Azam (), Zulkefly Abdul Karim () and Mohd Azlan Shah Zaidi ()
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Yusri Yahya: Universiti Kebangsaan Malaysia
Abdul Hafizh Mohd Azam: Universiti Kebangsaan Malaysia
Zulkefly Abdul Karim: Universiti Kebangsaan Malaysia
Mohd Azlan Shah Zaidi: Universiti Kebangsaan Malaysia

Economics Bulletin, 2025, vol. 45, issue 4, 2102 - 2110

Abstract: This study uses wavelet multiple cross correlations (WMCC) analysis to identify the reverse herding behaviour in equities market using a dataset from October 2009 to September 2023. WMCC is an enhances traditional cross-correlation analysis by integrating wavelet transform methods, enabling the simultaneous examination of interdependencies between multiple time series across various time scales. The empirical result shows that local retail investors lead other investors stock trading followed by local institutional in term of trading volume. This pattern occurs for both buy and sell activities thus supporting the existence of reverse herding in Malaysian stock market. Policymakers should explore implementing or enhancing mechanisms such as circuit breakers to address the potential rise in market volatility caused by retail investor sentiment and trading behaviours.

Keywords: Herding behaviour; Wavelet Multiple Cross-Correlation (WMCC); equities market; trading volume; investors (search for similar items in EconPapers)
JEL-codes: C1 G1 (search for similar items in EconPapers)
Date: 2025-12-30
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