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Sentiment and Beta Herding in the Borsa Istanbul (BIST)

In: Risk Management Post Financial Crisis: A Period of Monetary Easing

Author

Listed:
  • Nazmi Demir
  • Syed F. Mahmud
  • M. Nihat Solakoglu

Abstract

This study searches for sentimental herding in Borsa Istanbul (BIST) during the last decade using a state-space model employing cross-section standard deviations of systematic risk (Beta). It has been found that herding toward the market in the BIST-100 is both statistically significant and persistent independently from market fundamentals such as the volatility of returns and the levels of market returns. Herding trends over the sample period indicate that the financial crisis in 2000–2001 appeared to bring about sentimental herding in BIST which was followed by a calm period during which investors turned to fundamentals. Thereafter, we observe a volatile adverse herding pattern till the end of 2011 due to the confusing environment caused by the internal and external events.

Suggested Citation

  • Nazmi Demir & Syed F. Mahmud & M. Nihat Solakoglu, 2014. "Sentiment and Beta Herding in the Borsa Istanbul (BIST)," Contemporary Studies in Economic and Financial Analysis, in: Risk Management Post Financial Crisis: A Period of Monetary Easing, volume 96, pages 389-400, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:csefzz:s1569-375920140000096016
    DOI: 10.1108/S1569-375920140000096016
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    Citations

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    Cited by:

    1. Mostafa Hussein Abd-Alla, 2020. "Sentimental Herding: The Role Of Covid-19 Crisis In The Egyptian Stock Market," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 9(3), pages 9-23.

    More about this item

    Keywords

    Beta herding; state-space model; market fundamentals; cross-section volatility; C13; C31; G14; G12;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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