EconPapers    
Economics at your fingertips  
 

Cross herding between American industries and the oil market

Houda BenMabrouk and Houda Litimi

The North American Journal of Economics and Finance, 2018, vol. 45, issue C, 196-205

Abstract: This paper contributes to the debate on the cross-markets correlation by extending tests of herding behavior between the stock market and the crude oil market. We study herding behavior at the sector level during extreme oil market movements. Furthermore, we investigate the cross herding behavior between the two markets while including the volatility of the oil prices and investors’ sentiment. We use a modified version of the cross section absolute deviation model to infer the impact of the oil market on industry herding. Our database covers a sample of all U.S. stocks from January 2000 to December 2017 on a daily basis. The results indicate that industry herding is absent in all sectors. However, when considering the extreme oil market movements, the results suggest that sector herding is more pronounced during oil market downturns than upturns. Moreover, we find that the oil market volatility and investors’ sentiment reduce the industry herding. Our findings suggest that the herding is strongly related to the information in the oil market. In fact, investors use this information as trading signals, which affect their collective behavior. When the fear sentiment is high, investors do not follow the market consensus, but rather their own information making independent decisions.

Keywords: Cross-herding behavior; Oil market; Volatility; Investors’ sentiment; Extreme market movements (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062940817302851
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:45:y:2018:i:c:p:196-205

Access Statistics for this article

The North American Journal of Economics and Finance is currently edited by Hamid Beladi

More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-08-10
Handle: RePEc:eee:ecofin:v:45:y:2018:i:c:p:196-205