Sentimental herding in Borsa Istanbul: informed versus uninformed
Author
Solakoglu, M. N.
Demir, N.
Date
2014Source Title
Applied Economics Letters
Print ISSN
1350-4851
Electronic ISSN
1466-4291
Publisher
Routledge
Volume
21
Issue
14
Pages
965 - 968
Language
English
Type
ArticleItem Usage Stats
128
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Abstract
This study searches for sentimental herding in Borsa Istanbul (BIST) using a state-space model for two distinct groups of investors/traders. We expect to find no sentimental herding in BIST30 as the investors are closely following the market, given their access to maximum amount of information and high quality of guidance from the world-known intermediaries that reduce information asymmetries. However, as the SNM investors are mostly local investors with smaller assets and with higher level of information asymmetry, we expect to find evidence of sentimental herding. As expected, we find no evidence of herding by the BIST30 investors from 2000 to 2013. In contrast, our findings provide evidence that the SNM investors demonstrate sentimental herding persistently and independently from market fundamentals in three stages: evidence of herding in the first stage (2000-2004), a 4-year (2005-2008) no-herding calm period and finally a volatile adverse herding pattern (2009-2013) where fundamentals about the firm values became more important.