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Oil Speculation and Herding Behavior in Emerging Stock Markets

Esin Cakan (), Riza Demirer (), Rangan Gupta () and Hardik Marfatia

No 201749, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper explores the relationship between stock and commodity markets from a novel perspective by examining the relationship between speculation in the oil market and investor herding in stock markets. Using firm level data from three energy importing and exporting nations, namely Russia, Brazil, and Turkey, we show that these markets often switch between herding and anti-herding states, while herding is more prevalent in the case of Russia. We also find that speculative activities in the global oil market significantly affect investors behavior in Russia and Brazil with greater oil speculation associated with herding in these markets. Our findings suggest that policy makers should watch measures of speculative activities in the commodity markets for possible signals in order to model and monitor investor behavior in their local markets.

Keywords: Emerging markets; Herd behavior; Crude oil; Speculative ratio (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cis, nep-ene and nep-fmk
Date: 2017-06
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Journal Article: Oil speculation and herding behavior in emerging stock markets (2019) Downloads
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