Herding effect on idiosyncratic volatility in U.S. industries
Finance Research Letters, 2017, vol. 23, issue C, 121-132
This paper investigates the effect of herding behavior on excessive market idiosyncratic volatility in the U.S. stock market at a sectoral level. We carefully modify the cross sectional absolute deviation model to include trading volume and investors’ sentiment as herding triggers, and show that herding is indeed present in almost every sector of the U.S. stock market during turmoil periods. Furthermore, our particularly designed GJR-GARCH model provides new insights on the effect of herding and volume turnover on the conditional volatility. The sample covers all listed companies in the American stock market over four major turmoil periods.
Keywords: Herding; Turmoil; Volume turnover; Investor sentiment; Conditional volatility (search for similar items in EconPapers)
JEL-codes: G14 G15 C22 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:23:y:2017:i:c:p:121-132
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