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International herding: Does it differ across sectors?

Bartosz Gebka () and Mark Wohar ()

Journal of International Financial Markets, Institutions and Money, 2013, vol. 23, issue C, 55-84

Abstract: This paper investigates the existence of herding in the global equity market. We apply a methodology which utilises cross-country dispersion in index returns. An analysis of national indices world-wide unveils virtually no instances of global information cascades, as price patterns largely adhere to the predictions of the rational pricing models. However, some sector-specific indices reveal price patterns indicative of traders’ irrationality, especially in basic materials, consumer services, and oil and gas. This can be driven by a group of investors following each other in and out of markets, overconfidence, or excessive flight to quality. These irrational patterns decline over time.

Keywords: Herding; Financial contagion; International financial markets; Quantile regressions (search for similar items in EconPapers)
JEL-codes: F30 G01 G12 G14 G15 (search for similar items in EconPapers)
Date: 2013
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