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Herding towards higher moment CAPM, contagion of herding and macroeconomic shocks: Evidence from five major developed markets

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  • Messis, Petros
  • Zapranis, Achilleas

Abstract

This study firstly tries to investigate the existence of herding towards market, coskewness and cokurtosis for five developed markets (i.e. France, Germany, UK, USA and China). The state space model of Hwang and Salmon (2004) has been employed. Using monthly data for all stocks that constitute these particular indexes over the 2003–2011 period, we find significant evidence of herding towards the selected risk factors. Moreover, unexpected shocks on some macroeconomic variables result in the emergence of herding. The findings also confirm cases of contagion of herding during crises periods and bad economic conditions casting doubts on the benefits of international portfolio diversification.

Suggested Citation

  • Messis, Petros & Zapranis, Achilleas, 2014. "Herding towards higher moment CAPM, contagion of herding and macroeconomic shocks: Evidence from five major developed markets," Journal of Behavioral and Experimental Finance, Elsevier, vol. 4(C), pages 1-13.
    • Handle: RePEc:eee:beexfi:v:4:y:2014:i:c:p:1-13
    DOI: 10.1016/j.jbef.2014.09.002
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    Cited by:

    1. Puput Tri Komalasari & Marwan Asri & Bernardinus M. Purwanto & Bowo Setiyono, 2022. "Herding behaviour in the capital market: What do we know and what is next?," Management Review Quarterly, Springer, vol. 72(3), pages 745-787, September.
    2. Babalos, Vassilios & Stavroyiannis, Stavros & Gupta, Rangan, 2015. "Do commodity investors herd? Evidence from a time-varying stochastic volatility model," Resources Policy, Elsevier, vol. 46(P2), pages 281-287.
    3. Kumar, Satish & Rao, Sandeep & Goyal, Kirti & Goyal, Nisha, 2022. "Journal of Behavioral and Experimental Finance: A bibliometric overview," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).
    4. Zhang, Yi & Zhou, Long & Liu, Zhidong & Wu, Baoxiu, 2024. "Herding behaviour towards high order systematic risks and the contagion Effect—Evidence from BRICS stock markets," The North American Journal of Economics and Finance, Elsevier, vol. 74(C).
    5. Hilal Hümeyra Özsu, 2015. "Empirical Analysis of Herd Behavior in Borsa Istanbul," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 4(4), pages 27-52, December.
    6. Costa, Filipe & Fortuna, Natércia & Lobão, Júlio, 2024. "Herding states and stock market returns," Research in International Business and Finance, Elsevier, vol. 68(C).
    7. Wanidwaranan, Phasin & Padungsaksawasdi, Chaiyuth, 2020. "The effect of return jumps on herd behavior," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).

    More about this item

    Keywords

    Herding behaviour; Higher moment CAPM; Contagion; Macroeconomic shocks;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • F3 - International Economics - - International Finance

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