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The co-movement of stock prices, herd behaviour and high-tech mania

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  • Wen-Chung Guo
  • Hsiu-Ting Shih

Abstract

This article examines the evidence of herd behaviour and stock price co-movement within high-tech stocks in the Taiwan market. We study return dispersion, volatility dispersion and directional co-movement within the industry, finding their relations with high-tech mania and extreme markets. Our empirical results demonstrate more significant evidence of return dispersion, volatility dispersion, and a higher degree of directional co-movement in high-tech industries than in traditional industries. Both return dispersion and volatility dispersion were found to have a consistent association with extreme market movements for high-tech stocks. However, the level of directional co-movement, as a modified measure of herd behaviour, is greater during extreme markets for all industries, with an asymmetric result that has great significance for herding during extreme up markets as related to down markets.

Suggested Citation

  • Wen-Chung Guo & Hsiu-Ting Shih, 2008. "The co-movement of stock prices, herd behaviour and high-tech mania," Applied Financial Economics, Taylor & Francis Journals, vol. 18(16), pages 1343-1350.
  • Handle: RePEc:taf:apfiec:v:18:y:2008:i:16:p:1343-1350
    DOI: 10.1080/09603100701720310
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    Cited by:

    1. Marina Nikiforow, 2010. "Does training on behavioural finance influence fund managers' perception and behaviour?," Applied Financial Economics, Taylor & Francis Journals, vol. 20(7), pages 515-528.
    2. Chien-Chiang Lee & Mei-Ping Chen & Kuan-Mien Hsieh, 2012. "Industry herding and market states: evidence from Chinese stock markets," Quantitative Finance, Taylor & Francis Journals, vol. 13(7), pages 1091-1113, October.
    3. Chen, Mei-Ping & Chen, Wen-Yi & Tseng, Tseng-Chan, 2017. "Co-movements of returns in the health care sectors from the US, UK, and Germany stock markets: Evidence from the continuous wavelet analyses," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 484-498.
    4. Shah, Mohay Ud Din & Shah, Attaullah & Khan, Safi Ullah, 2017. "Herding behavior in the Pakistan stock exchange: Some new insights," Research in International Business and Finance, Elsevier, vol. 42(C), pages 865-873.
    5. Aram Balagyozyan & Esin Cakan, 2016. "Did large institutional investors flock into the technology herd? An empirical investigation using a vector Markov-switching model," Applied Economics, Taylor & Francis Journals, vol. 48(58), pages 5731-5747, December.
    6. Zhiyong Dong & Qingyang Gu & Xu Han, 2010. "Ambiguity aversion and rational herd behaviour," Applied Financial Economics, Taylor & Francis Journals, vol. 20(4), pages 331-343.

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