بررسی رفتار انتقادی در بازارهای سهام: چشم انداز بین المللی

We examine the investment behavior of market participants within different international markets (i.e., US, Hong Kong, Japan, South Korea, and Taiwan), specifically with regard to their tendency to exhibit herd behavior. We find no evidence of herding on the part of market participants in the US and Hong Kong and partial evidence of herding in Japan. However, for South Korea and Taiwan, the two emerging markets in our sample, we document significant evidence of herding. The results are robust across various size-based portfolios and over time. Furthermore, macroeconomic information rather than firm-specific information tends to have a more significant impact on investor behavior in markets which exhibit herding. In all five markets, the rate of increase in security return dispersion as a function of the aggregate market return is higher in up market, relative to down market days. This is consistent with the directional asymmetry documented by McQueen et al. (1996) (McQueen, G., Pinegar, M.A., Thorley, S., 1996. Journal of Finance 51, 889–919).

Academic researchers have devoted considerable effort in understanding the investment behavior of market participants and its ensuing impact on security prices. The investment behavior of market participants has been linked to factors such as investor’s investment horizons, the benchmarks used to measure performance, the behavior of other market participants, the degree of underlying market volatility, and the presence of fads and speculative trading activity in the financial markets. In this paper, we investigate the investment behavior of market participants within different international markets, specifically with regard to their tendency to mimic the actions of others, i.e., engage in herd behavior. Herding can be construed as being either a rational or irrational form of investor behavior. According to Devenow and Welch (1996), the irrational view focuses on investor psychology where investors disregard their prior beliefs and follow other investors blindly. The rational view, on the other hand, focuses on the principal–agent problem in which managers mimic the actions of others, completely ignoring their own private information to maintain their reputational capital in the market Scharfstein and Stein, 1990 and Rajan, 1994.1Bikhchandani et al. (1992) and Welch (1992) refer to this behavior as an informational cascade. In a recent empirical study, Christie and Huang (1995) examine the investment behavior of market participants in the US equity market. By utilizing the cross-sectional standard deviation of returns (CSSD) as a measure of the average proximity of individual asset returns to the realized market average, they develop a test of herd behavior. In particular, they examine the behavior of CSSD under various market conditions. They argue that if market participants suppress their own predictions about asset prices during periods of large market movements and base their investment decisions solely on aggregate market behavior, individual asset returns will not diverge substantially from the overall market return, hence resulting in a smaller than normal CSSD. In this paper, we extend the work of Christie and Huang (1995) along three dimensions. First, we propose a new and more powerful approach to detect herding based on equity return behavior. Using a non-linear regression specification, we examine the relation between the level of equity return dispersions (as measured by the cross-sectional absolute deviation of returns, i.e., CSAD), and the overall market return. In the presence of severe (moderate) herding, we expect that return dispersions will decrease (or increase at a decreasing rate) with an increase in the market return. Second, we examine the presence of herding across both developed and developing financial markets including the US, Hong Kong, Japan, South Korea, and Taiwan. Examining herding is interesting in an international context since differences in factors such as the relative importance of institutional versus individual investors, the quality and level of information disclosure, the level of sophistication of derivatives markets, etc., can affect investor behavior in these markets. Third, we test for shifts in herd behavior subsequent to the liberalization of Asian financial markets. Our empirical tests indicate that during periods of extreme price movements, equity return dispersions for the US and Hong Kong continue to increase linearly, hence providing evidence against the presence of herd behavior. The results for the US are consistent with those documented by Christie and Huang (1995). However, for South Korea and Taiwan, the two emerging markets in our sample, we find a significant non-linear relation between equity return dispersions and the underlying market price movement, i.e., the equity return dispersions either increase at a decreasing rate or decrease with an increase in the absolute value of the market return. Interestingly, in all five markets, the rate of increase in return dispersion (as measured by CSAD) as a function of the aggregate market return, is higher when the market is advancing than when it is declining. This is consistent with the directional asymmetry documented by McQueen et al. (1996) where all stocks tend to react quickly to negative macroeconomic news, but small stocks tend to exhibit delayed reaction to positive macroeconomic news. We also document that in South Korea and Taiwan, where the evidence in favor of herding is most pronounced, systematic risk accounts for a relatively large portion of overall security risk. This evidence is consistent with the view that the relative scarcity of rapid and accurate firm-specific information in emerging financial markets may cause investors to focus more on macroeconomic information. However, to the extent that investors react to any useful information, whether it is firm specific or market related, such type of behavior can be viewed as being rational. Furthermore, results of the size, i.e., market capitalization based portfolio tests, indicate that our herding results are not driven by either large or small capitalization stocks. In addition, the results for both South Korea and Taiwan remain relatively robust in various sub-period tests designed to capture shifts in investment behavior associated with the liberalization of these economies. We also conduct tests to examine whether the presence of daily price limits imposed on stocks in South Korea and Taiwan, are impacting our findings. Our additional tests do not alter the overall evidence in favor of herding in the equity markets of South Korea and Taiwan. An important implication of investing in a financial market where market participants tend to herd around the aggregate market consensus, is that a larger number of securities are needed to achieve the same level of diversification than in an otherwise normal market. The remainder of the paper is organized as follows. In Section 2, we provide methodological details and a description of the data. In Section 3, we provide a discussion of the empirical results and in Section 4 we provide concluding remarks and discuss implications of our findings.

In this paper, we examine the investment behavior of market participants within different international markets (US, Hong Kong, Japan, South Korea, and Taiwan), specifically with regard to their tendency to conform with aggregate market behavior, i.e., exhibit herding. In our empirical tests, we use a variant of the methodology used by Christie and Huang (1995). The underlying intuition behind our approach is as follows. We show that when equity return dispersion is measured by the cross-sectional absolute deviation of returns, rational asset pricing models predict not only that dispersion is an increasing function of the market return but also that the relation is linear. Furthermore, an increased tendency on the part of market participants to herd around the market consensus during periods of large price movements is sufficient to convert the linear relation into a non-linear one. To capture this effect, we employ a non-linear regression specification, which is similar in spirit to the market timing measure of Treynor and Mazuy (1966). Our empirical tests indicate that during periods of extreme price movements, equity return dispersions for the US, Hong Kong and Japan actually tend to increase rather than decrease, hence providing evidence against the presence of any herd behavior. The results for the US are consistent with those documented by Christie and Huang (1995). However, for South Korea and Taiwan, the two emerging economies in our sample, we find dramatically different results. For both countries, we document the presence of smaller equity return dispersions (and hence herding) during both extreme up and down price movement days. The differences in return dispersions across the developed and emerging markets may partly be the result of incomplete information disclosure in the emerging markets. In fact, our empirical tests suggest that in South Korea and Taiwan, where the evidence in favor of herding is most pronounced, macroeconomic information tends to play a significantly greater role in the decision making process of market participants. The results of market capitalization based portfolio tests indicate that our herding results are not driven by either the large or small capitalization stocks. In addition, the results for both South Korea and Taiwan remain relatively robust in various sub-period tests designed to capture shifts in investment behavior associated with the liberalization of these economies. Lastly, we conduct tests to examine whether the presence of daily price limits imposed on stocks in South Korea and Taiwan may be impacting our findings. However, these tests do not alter our overall evidence in favor of herding in the equity markets of South Korea and Taiwan. An important investment implication of our study is that in economies such as South Korea and Taiwan where market participants tend to herd around the aggregate market consensus, a larger number of securities are needed to achieve the same level of diversification than in an otherwise normal market.