Economics at your fingertips  

Regime-switching herd behavior: Novel evidence from the Chinese A-share market

Jingxue Fu and Lan Wu

Finance Research Letters, 2021, vol. 39, issue C

Abstract: We examine time-variations of herd behavior by proposing a Markov regime-switching model. Our model can not only infer the hidden market state which drives the time-varying herd behavior, but can also capture the empirical characteristics. We conduct a comprehensive empirical analysis of the Chinese A-share market. We find evidence that herding is prominent in volatile regimes, while adverse herding is prevalent during tranquil regimes. Moreover, we conduct a simulation example to explain why previous studies on herding presented conflicting results. Finally, we check for herding effects at factor and industry levels, and employ multiple testing to integrate all the results.

Keywords: Herd behavior; Markov regime-switching model; Cross-sectional return dispersion; Chinese A-share stock market (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
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:

DOI: 10.1016/

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2021-06-30
Handle: RePEc:eee:finlet:v:39:y:2021:i:c:s1544612318301090