Herding behaviour towards high order systematic risks and the contagion effect - evidence from BRICS stock markets

Zhang, Yi and Zhou, Long and Liu, Zhidong and Wu, Baoxiu (2024) Herding behaviour towards high order systematic risks and the contagion effect - evidence from BRICS stock markets. North American Journal of Economics and Finance, 74. 102219. ISSN 1062-9408 (https://doi.org/10.1016/j.najef.2024.102219)

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Abstract

This paper investigates the existence of herding movements towards several systematic risk factors derived from the Capital Asset Pricing Model (CAPM) and its extensions. The measure of herding is estimated using the dispersion of the risk factor loadings. The state space model is employed to extract time series of herding dynamics. We empirically survey the herding behaviors in the BRICS stock markets (i.e., Brazil, Russia, India, China, and South Africa) using monthly stock index data from 2006 to 2022, and identify various herding patterns towards specific factors. We also examine the impact of unanticipated shocks in crucial macroeconomic variables on the degree of herding measure in these countries. Lastly, we test the contagion hypothesis of herding across markets using correlation analysis. The results show that the level of herding linkages increases significantly in periods of market stress, casting doubt on the effectiveness of asset allocation in these markets for the sake of diversity.

  • Item type:Article
    ID code:89607
    Dates:
    Date
    Event
    1 September 2024
    Published
    8 June 2024
    Published Online
    6 June 2024
    Accepted
    Subjects:
    Social Sciences > Economic Theory
    Department:
    Depositing user: Pure Administrator
    Date deposited:14 Jun 2024 15:00
    Last modified:25 Jun 2024 07:07
    URI:https://strathprints.strath.ac.uk/id/eprint/89607
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