Herding Behavior in Developed, Emerging, and Frontier European Stock Markets during COVID-19 Pandemic

Sinisa Bogdan, Natali Suštar and Bojana Olgić Draženović
Additional contact information
Natali Suštar: Faculty of Tourism and Hospitality Management, University of Rijeka, 51410 Opatija, Croatia
Bojana Olgić Draženović: Faculty of Economics and Business, University of Rijeka, 51000 Rijeka, Croatia

JRFM, 2022, vol. 15, issue 9, 1-12

Abstract: The behavior of market participants often does not rely on market signals, but replicates the investment decisions of other parties. The convergence of their investment behavior leads to the emergence of herd behavior with negative implications for financial stability. Moreover, this phenomenon may be even more pronounced in times of crisis. Although herding is an interesting topic which invites the interest of academic researchers, it still has not been sufficiently studied in terms of comparing the herd effect between differently developed stock markets. The first objective of this research was to determine the herd behavior during the COVID-19 pandemic using static and rolling regression analysis. The second objective was to investigate whether the herd behavior was triggered by the pandemic, while the third objective was to compare the differences in herd behavior between differently developed European stock markets. The results show that this phenomenon is most pronounced in emerging markets, followed by frontier markets and developed markets. Therefore, the results of this study are of particular importance for individual and institutional investors to achieve efficient risk diversification and for financial authorities to establish rules and avoid an increase in herd behavior.

Keywords: behavioral finance; herd behavior; CSAD; CSSD; crisis (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.mdpi.com/1911-8074/15/9/400/pdf (application/pdf)
https://www.mdpi.com/1911-8074/15/9/400/ (text/html)

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: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:15:y:2022:i:9:p:400-:d:911349

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().