Bond market investor herding: Evidence from the European financial crisis

Emilios C. Galariotis, Styliani Irida Krokida and Spyros Spyrou
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Emilios C. Galariotis: Audencia Business School

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Abstract: During the recent financial crisis, numerous EU officials, market participants and the media suggested that irrational herdingwas a key factor for the financial turmoil and the soaring yield spreads. In this paperwe test for evidence of herd behavior in European government bond prices and, overall, we find no evidence of investor herding either before or after the EU crisis.We do find, however, in an original contribution to the bond market literature, strong evidence that during the EU crisis period, macroeconomic information announcements induced bond market investor herding; a finding that confirms the notion of ‘spurious' herding proposed by Bikhchandani and Sharma (2001) for bond markets. Further tests reinforce this finding and also indicate the existence of herding spill-over effects.

Keywords: Herding; Bond markets; Financial crisis (search for similar items in EconPapers)
Date: 2016-12
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Citations: View citations in EconPapers (26)

Published in International Review of Financial Analysis, 2016, 48, pp.367-375. ⟨10.1016/j.irfa.2015.01.001⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01333218

DOI: 10.1016/j.irfa.2015.01.001

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