Herding in frontier markets: Evidence from African stock exchanges
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Date
2016
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Abstract
We investigate herding in eight African frontier stock markets between January 2002 and July 2015,
given the limited evidence on herding in frontier markets. Herding appears significant throughout the
2002-2015 period for all markets, with smaller stocks found to enhance its magnitude. Herding entails
no clear asymmetries conditional on market performance; conversely, it appears notably asymmetric
when conditioned on market volatility, as it is significant (or stronger) mainly during low volatility
days, without this pattern, however, surviving when accounting for the 2007-2009 crisis. The US and
South African markets motivate herding on a small number of occasions only, while the return
dynamics of a regional economic initiative’s member-markets are found to induce herding in each
other very rarely, thus demonstrating that investors’ behaviour in markets with low integration in the
international financial system is not significantly affected by non-domestic factors.
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Keywords
frontier markets, African stock exchanges, herding, frontier markets, asymmetric behaviour, Africa
Citation
APA