Browsing by Subject "Cross-sectional volatility"

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Open Access
Herding in Middle Eastern frontier markets: are local and global factors important?
(Elsevier, 2016) Demir, Nazmi; Solakoğlu, M. Nihat; Andrikopoulos, P.; Gregoriou, G. N.; Kallinterakis, V.
In this study we look for sentimental herding in a sample of frontier markets in the Middle East, using a state-space approach. The stock markets we consider are Oman, Bahrain, Qatar, and Kuwait. We use daily data to estimate monthly betas from a market model and test to see whether estimated monthly betas are biased, which would indicate the existence of herding or adverse herding. We also analyze the effect of extreme global and local events, and market conditions, on herding behavior. For extreme global market conditions we use major events such as the 2007-08 global financial crisis, as well as extreme variations in market returns. Furthermore, given the significance of petroleum in these markets, extreme price changes in spot-oil prices are also used for extreme market conditions. As for local events, we also test to see if events during the so-called Arab Spring in the region-eg, the Syrian internal war and Egyptian political movements-have had any impact on herd behavior. We find the existence of herding and adverse herding in Kuwait and Qatar, but not in Bahrain and Oman, revealing that market category is not a determinant of herding. In addition, our results show that while herding in Kuwait is influenced by local and global factors, herding in Qatar is influenced by oil returns and oil return volatility. © 2016 Elsevier Inc. All rights reserved.
Open Access
Sentimental herding in Borsa Istanbul: informed versus uninformed
(Routledge, 2014) Solakoglu, M. N.; Demir, N.
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.