Static and regime-dependent herding behavior: An emerging market case study

Abdollah Ah Mand, Imtiaz Sifat

    Research output: Contribution to journalArticleResearchpeer-review


    We contribute to behavioral finance literature by demonstrating the relative superiority of a dynamic regime-sensitive approach in unraveling herding phenomenon. Employing daily data in Bursa Malaysia from 1995 to 2016, we first apply two orthodox techniques: cross-sectional standard deviation of returns (CSSD) model of Christie and Huang (2005) and the cross-sectional absolute dispersion (CSAD) model of Chang et al. (2000). The ensuing results appear inconsistent, with only one model capturing herding. In contrast, the dynamic approach with a two-state Markov Switching model reveals that herding is a heavily regime-dependent and non-linear phenomenon. A deeper dive via sectoral decompositions shows that the financial sector and large- and mid-capitalization segments are more herding-prone.

    Original languageEnglish
    Article number100466
    Number of pages10
    JournalJournal of Behavioral and Experimental Finance
    Publication statusPublished - Mar 2021


    • Behavioral finance
    • Bursa Malaysia
    • Herd behavior
    • Herding
    • Malaysia

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