Herding by corporates in the US and the Eurozone through different market conditions

Meryem Duygun, Radu Tunaru and Davide Vioto

Journal of International Money and Finance, 2021, vol. 110, issue C

Abstract: In this study, we test the herding towards a market consensus in the main financial industries of the United States and the Eurozone equity markets. We find that herding is more likely to be present in high quantiles that reflects turbulent market conditions. This herding appears to be more pronounced during financial crisis periods and in cases of asymmetric conditions of volatility, credit deterioration, and illiquid funding. Furthermore, we provide evidence that the cross-sectional dispersion of returns throughout the domestic equity market can be partly explained by the corresponding dispersions of the financial industries. In our analysis we cover the last two main global financial crises and identify new evidence of “spurious” and “intentional” herding by corporates. Further, our results are robust when considering short-selling bans.

Keywords: Herding behavior; Financial crisis; Fundamental information; Quantile regression (search for similar items in EconPapers)
JEL-codes: C22 G01 G14 G15 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:110:y:2021:i:c:s0261560620302679

DOI: 10.1016/j.jimonfin.2020.102311

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