Asymmetrical Individual Return Herding

Herding takes place when individuals tend to rely on the consensus opinion and past trades rather than on fundamental asset pricing. In this study, we focus on 101 Chilean stocks over the period 1990-2009. Contrary to empirical evidence for the United States and international markets (e.g., Christie...

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Bibliographic Details
Published in:	Academia (Consejo Latinoamericano de Escuelas de Administración) 2010-01, Vol.45 (45), p.20-39
Main Author:	Fernández, Viviana
Format:	Article
Language:	por ; eng
Subjects:	Asset pricing Asymmetry Business cycles Chile Consensus Cost Indexes Diachronic analysis Distribution economics Emerging markets Evidence Fundamental research Herding Hypotheses Institutional investments Opinion Pension funds Retirement Benefits Sample surveys Securities markets Stock exchanges Time series Trade volume Volatility
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Summary:	Herding takes place when individuals tend to rely on the consensus opinion and past trades rather than on fundamental asset pricing. In this study, we focus on 101 Chilean stocks over the period 1990-2009. Contrary to empirical evidence for the United States and international markets (e.g., Christie & Huang, 1995; Demirer & Kutan, 2006; Gleason, Lee & Mathur 2003; Gleason, Mathur &Peterson, 2004), we conclude that herding in individual stocks is more likely during extreme down markets, after controlling for trading volume. Our results also suggest an inverse relationship between volatility and trading volume, which contradicts the one-factor mixture-of-distribution hypothesis (MDH). Such an inverse association appears statistically more significant when choosing more extreme return thresholds.
ISSN:	1012-8255 2056-5127