Herding states and stock market returns

• Type: Article in International Scientific Journal
• Date: 2024

Authors

Costa, F (Author) Other; Fortuna, N (Author) Other; Lobão, J (Author) FEP

Journal

Title: Research in International Business and Finance

Vol. 68

ISSN: 0275-5319

Publisher: Elsevier

Indexing

ISI Web of Knowledge - 4 Citations

Scopus - 4 Citations

Other information

Authenticus ID: P-00Z-AJJ

DOI: 10.1016/j.ribaf.2023.102163

Abstract (EN): This paper investigates whether herd behaviour states (intense/adverse) affect stock market returns using a fixed effects model to capture cross-sectional and time variability covering the European region. We show that stock market returns depend on past herding states. From December 1992 to December 2020, the mean returns following an intense herding state are 0.26% lower per month over a six-month holding period than following an adverse herding state. Our results are robust to using risk-adjusted returns and a continuous herding variable. We also show that intense herding emerges during periods of lower returns and higher volatility than adverse herding. © 2023 The Author(s)

Language: English

Type (Professor's evaluation): Scientific