Does speculation in the oil market drive investor herding in emerging stock markets?
Mehmet Balcilar (),
Riza Demirer () and
Energy Economics, 2017, vol. 65, issue C, 50-63
This paper examines whether the time variation in the level of investor herding in the stock markets of major oil exporting nations relates to speculation and volatility in the global oil market. We find that speculative activities in the oil market, rather than oil price movements, are positively correlated with anti-herding in the stock markets of major exporters. We argue that traders take the speculative signals from the oil market as a sign of positive expectations and try to generate superior profits by going against the crowd in their local market. While this pattern largely holds during calm (low volatility) market periods, we also find that significant herd behavior takes place during high volatility (or crisis) periods. The findings suggest that policy makers who are concerned about stability in their stock markets should monitor measures of speculative activities in the energy market in order to model and monitor volatility and/or risk transmissions into their markets.
Keywords: Crude oil; Speculative ratio; Herd behavior; Equity return dispersion; Markov-switching (search for similar items in EconPapers)
JEL-codes: C32 G14 G15 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:65:y:2017:i:c:p:50-63
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