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The Response of Dynamic Herd Behavior to Domestic and U.S. Market Factors: Evidence from the Greater China Stock Markets

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  • Wan-Ru Yang
  • Yi-Ling Chen

Abstract

We investigate the dynamic reaction of stock market herding in China, Hong Kong, and Taiwan to unexpected shocks from domestic and U.S. market factors. In China and Taiwan, herding is more pronounced, and the investors tend to herd with the rising stock market returns. Overconfident investors will herd on the subsequent trading days under market stress. Compared with the response to the domestic market factors, the responses of herding in the Greater China stock market to the U.S. market factors are weaker. After the 2007–8 financial crisis, the U.S. market factors highly explain the forecast error variance of herding in the Shanghai A-share and Taiwan markets.

Suggested Citation

  • Wan-Ru Yang & Yi-Ling Chen, 2015. "The Response of Dynamic Herd Behavior to Domestic and U.S. Market Factors: Evidence from the Greater China Stock Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(S1), pages 18-41, January.
    • Handle: RePEc:mes:emfitr:v:51:y:2015:i:s1:p:s18-s41
    DOI: 10.1080/1540496X.2014.998884
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    Cited by:

    1. Talpsepp, Tõnn & Tänav, Anne-Liis, 2021. "Do gender, age and education affect herding in the real estate market?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 32(C).
    2. 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.
    3. Lee, Kyuseok, 2017. "Herd behavior of the overall market: Evidence based on the cross-sectional comovement of returns," The North American Journal of Economics and Finance, Elsevier, vol. 42(C), pages 266-284.

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