Research article

Navigating the herd: The dynamics of investor behavior in the Brazilian stock market

  • Received: 06 June 2024 Revised: 20 September 2024 Accepted: 24 September 2024 Published: 27 September 2024
  • JEL Codes: G11, G40, G41

  • We investigated under-researched dimensions of market-wide herding behavior in the Brazilian stock market using a sample from January 2010 to December 2022. Employing OLS and quantile regressions, we found no evidence of herding in the sample or across market conditions, including return, trading volume, and volatility. However, dynamic analysis via rolling window regressions revealed intermittent herding behavior during various subperiods, including at the onset of the COVID-19 pandemic and around the beginning of the war in Ukraine. Additionally, regression results differentiate between herding driven by fundamental and non-fundamental factors, elucidating the predominance of negative herding attributable to non-fundamental influences. These findings underscore the presence of irrational behavior among investors, potentially leading to increased price instability and deviations from fundamental values. Moreover, the association of negative herding with diversifiable risk suggests potential implications for portfolio composition. Overall, this study contributes to understanding investor behavior in emerging markets and highlights the impact of herding on market dynamics and portfolio management strategies.

    Citation: Júlio Lobão, Luís Pacheco, Maria Beatriz Naia. Navigating the herd: The dynamics of investor behavior in the Brazilian stock market[J]. Quantitative Finance and Economics, 2024, 8(3): 635-657. doi: 10.3934/QFE.2024024

    Related Papers:

  • We investigated under-researched dimensions of market-wide herding behavior in the Brazilian stock market using a sample from January 2010 to December 2022. Employing OLS and quantile regressions, we found no evidence of herding in the sample or across market conditions, including return, trading volume, and volatility. However, dynamic analysis via rolling window regressions revealed intermittent herding behavior during various subperiods, including at the onset of the COVID-19 pandemic and around the beginning of the war in Ukraine. Additionally, regression results differentiate between herding driven by fundamental and non-fundamental factors, elucidating the predominance of negative herding attributable to non-fundamental influences. These findings underscore the presence of irrational behavior among investors, potentially leading to increased price instability and deviations from fundamental values. Moreover, the association of negative herding with diversifiable risk suggests potential implications for portfolio composition. Overall, this study contributes to understanding investor behavior in emerging markets and highlights the impact of herding on market dynamics and portfolio management strategies.



    加载中


    [1] Aharon DY (2021) Uncertainty, Fear and Herding Behavior: Evidence from Size-Ranked Portfolios. J Behav Financ 22: 320–337. https://doi.org/10.1080/15427560.2020.1774887 doi: 10.1080/15427560.2020.1774887
    [2] Amihud Y (2002) Illiquidity and stock returns: cross-section and time-series effects. J Financ Mark 5: 31–56. https://doi.org/10.1016/S1386-4181(01)00024-6 doi: 10.1016/S1386-4181(01)00024-6
    [3] Antonelli-Filho P, Bressan AA, Vieira KM, et al. (2021) Sensation Seeking and Overconfidence in day traders: evidence from Brazil. Rev Behav Finance 13: 486–501. https://doi.org/10.1108/RBF-05-2020-0104 doi: 10.1108/RBF-05-2020-0104
    [4] Antony A (2020) Behavioral finance and portfolio management: Review of theory and literature. J Public Aff 20: e1996. https://doi.org/10.1002/pa.1996 doi: 10.1002/pa.1996
    [5] Arjoon V, Bhatnagar CS, Ramlakhan P (2020) Herding in the Singapore stock Exchange. J Econ Bus 109: 105889. https://doi.org/10.1016/j.jeconbus.2019.105889 doi: 10.1016/j.jeconbus.2019.105889
    [6] Babalos V, Stavroyiannis S (2015) Herding, anti-herding behaviour in metal commodities futures: a novel portfolio-based approach. Appl Econ 47: 4952–4966. https://doi.org/10.1080/00036846.2015.1039702 doi: 10.1080/00036846.2015.1039702
    [7] Batmunkh MU, Choijil E, Vieito JP, et al. (2020) Does herding behavior exist in the Mongolian stock market? Pac-Basin Financ J 62: 101352. https://doi.org/10.1016/j.pacfin.2020.101352 doi: 10.1016/j.pacfin.2020.101352
    [8] Bekiros S, Jlassi M, Lucey B, et al. (2017) Herding behavior, market sentiment and volatility: Will the bubbble resume? N Am J Econ Financ 42: 107–131. https://doi.org/10.1016/j.najef.2017.07.005 doi: 10.1016/j.najef.2017.07.005
    [9] Bikhchandani S, Sharma S (2000) Herd behavior in financial markets. IMF Staff Pap 47: 279–310. https://doi.org/10.5089/9781451846737.001 doi: 10.5089/9781451846737.001
    [10] Bogdan S, Suštar N, Draženović BO (2022) Herding behavior in developed, emerging, and frontier European stock markets during COVID-19 pandemic. J Risk Financ Manag 15: 400. https://doi.org/10.3390/jrfm15090400 doi: 10.3390/jrfm15090400
    [11] Bohl MY, Branger N, Trede M (2017) The case for herding is stronger than you think. J Bank Financ 85: 30–40. https://doi.org/10.1016/j.jbankfin.2017.08.006 doi: 10.1016/j.jbankfin.2017.08.006
    [12] Bouri E, Gupta R, Roubaud D (2019) Herding behaviour in cryptocurrencies. Financ Res Lett 29: 216–221. https://doi.org/10.1016/j.frl.2018.07.008 doi: 10.1016/j.frl.2018.07.008
    [13] Brazilian Center for Research in Financial Economics of the University of São Paulo (NEFIN) (2023) Risk Factors. Acessed on 11th April 2023. Available from: https://nefin.com.br/data/risk_factors.html.
    [14] Cakan E, Demirer R, Gupta R, et al. (2018) Oil speculation and herding behavior in emerging stock markets. J Econ Financ 43: 44–56. https://doi.org/10.1007/s12197-018-9427-0 doi: 10.1007/s12197-018-9427-0
    [15] Caporale GM, Economou F, Philippas N (2008) Herd behaviour in extreme market conditions: the case of the Athens Stock Exchange. Econ B 7: 1–13.
    [16] Carhart MM (1997) On persistence in mutual fund performance. J Financ 52: 57–82. https://doi.org/10.2307/2329556 doi: 10.2307/2329556
    [17] Chang EC, Cheng JW, Khorana A (2000) An examination of herd behavior in equity markets: An international perspective. J Bank Financ 24: 1651–1679. https://doi.org/10.1016/S0378-4266(99)00096-5 doi: 10.1016/S0378-4266(99)00096-5
    [18] Chen T (2013) Do investors herd in global stock markets? J Behav Financ 14: 230–239. https://doi.org/10.1080/15427560.2013.819804 doi: 10.1080/15427560.2013.819804
    [19] Chiang TC, Li J, Tan L (2010) Empirical investigation of herding behavior in Chinese stock markets: Evidence from quantile regression analysis. Glob Financ J 21: 111–124. https://doi.org/10.1016/j.gfj.2010.03.005 doi: 10.1016/j.gfj.2010.03.005
    [20] Chiang TC, Zheng D (2010) An empirical analysis of herd behavior in global stock markets. J Bank Financ 34: 1911–1921. https://doi.org/10.1016/j.jbankfin.2009.12.014 doi: 10.1016/j.jbankfin.2009.12.014
    [21] Choi KH, Yoon SM (2020) Investor sentiment and herding behavior in the Korean Stock Market. Int J Financ Stud 8: 34. https://doi.org/10.3390/ijfs8020034 doi: 10.3390/ijfs8020034
    [22] Choi N, Sias RW (2009) Institutional industry herding. J Financ Econ 94: 469–491. https://doi.org/10.1016/j.jfineco.2008.12.009 doi: 10.1016/j.jfineco.2008.12.009
    [23] Costa F, Fortuna N, Lobão J (2024) Herding states and stock market returns. Res Int Bus Financ 68: 102163. https://doi.org/10.1016/j.ribaf.2023.102163 doi: 10.1016/j.ribaf.2023.102163
    [24] Dang HV, Lin M (2016) Herd mentality in the stock market: On the role of idiosyncratic participants with heterogeneous information. Int Rev Financ Analy 48: 247–260. https://doi.org/10.1016/j.irfa.2016.10.005 doi: 10.1016/j.irfa.2016.10.005
    [25] de Almeida RP, Costa HC, da Costa NCA (2012) Herd behavior in Latin American stock markets. Latin Am Bus Rev 13: 81–102. https://doi.org/10.1080/10978526.2012.700271 doi: 10.1080/10978526.2012.700271
    [26] Economou F, Katsikas E, Vickers G (2016) Testing for herding in the Athens Stock Exchange during the crisis period. Financ Res Lett 18: 334–341. https://doi.org/10.1016/j.frl.2016.05.011 doi: 10.1016/j.frl.2016.05.011
    [27] Economou F, Kostakis A, Philippas N (2011) Cross-country effects in herding behaviour: Evidence from four south European markets. J Int Financ Mark I 21: 443–460. https://doi.org/10.1016/j.intfin.2011.01.005 doi: 10.1016/j.intfin.2011.01.005
    [28] Fama EF, French KR (1993) Common risk factors in the returns on stocks and bonds. J Financ Econ 33: 3–56. https://doi.org/10.1016/0304-405X(93)90023-5 doi: 10.1016/0304-405X(93)90023-5
    [29] Fama EF, French KR (2015) A five-factor asset pricing model. J Financ Econ 116: 1–22. https://doi.org/10.1016/j.jfineco.2014.10.010 doi: 10.1016/j.jfineco.2014.10.010
    [30] Galariotis EC, Rong W, Spyrou SI (2015) Herding on fundamental information: A comparative study. J Bank Financ 50: 589–598. https://doi.org/10.1016/j.jbankfin.2014.03.014 doi: 10.1016/j.jbankfin.2014.03.014
    [31] Gębka B, Wohar ME (2013) International herding: Does it differ across sectors? J Int Financ Mark I 23: 55–84. https://doi.org/10.1016/j.intfin.2012.09.003 doi: 10.1016/j.intfin.2012.09.003
    [32] Gouta S, BenMabrouk H (2024) The nexus between herding behavior and spillover: evidence from G7 and BRICS. Rev Behav Financ 16: 360–377. https://doi.org/10.1108/RBF-01-2023-0016 doi: 10.1108/RBF-01-2023-0016
    [33] Hirshleifer D (2015) Behavioral Finance. Annual Rev Financ Econ 7: 133–159. https://doi.org/10.1146/annurev-financial-092214-043752 doi: 10.1146/annurev-financial-092214-043752
    [34] Hirshleifer D, Hong Teoh S (2003) Herd behaviour and cascading in capital markets: A review and synthesis. Eur Financ Manage 9: 25–66. https://doi.org/10.1111/1468-036X.00207 doi: 10.1111/1468-036X.00207
    [35] Hwang S, Salmon M (2004) Market stress and herding. J Empir Financ 11: 585–616. https://doi.org/10.1016/j.jempfin.2004.04.003 doi: 10.1016/j.jempfin.2004.04.003
    [36] Indārs ER, Savin A, Lublóy Á (2019) Herding behaviour in an emerging market: Evidence from the Moscow Exchange. Emerg Mark Rev 38: 468–487. https://doi.org/10.1016/j.ememar.2018.12.002 doi: 10.1016/j.ememar.2018.12.002
    [37] Jiang R, Wen C, Zhang R, et al. (2022) Investor's herding behavior in Asian equity markets during COVID-19 period. Pac-Asin Financ J 73: 101771. https://doi.org/10.1016/j.pacfin.2022.101771 doi: 10.1016/j.pacfin.2022.101771
    [38] Kahneman D, Tversky A (1979) Prospect Theory: An analysis of decision under risk. Econometrica 47: 263–292. https://doi.org/10.2307/1914185 doi: 10.2307/1914185
    [39] Kremer S, Nautz D (2013) Causes and consequences of short-term institutional herding. J Bank Financ 37: 1676–1686. https://doi.org/10.1016/j.jbankfin.2012.12.006 doi: 10.1016/j.jbankfin.2012.12.006
    [40] Litimi H (2017) Herd behavior in the French stock market. Rev Account Financ 16: 497–515. https://doi.org/10.1108/raf-11-2016-0188 doi: 10.1108/raf-11-2016-0188
    [41] Liu T, Zheng D, Zheng S, et al. (2023) Herding in Chinese stock markets: Evidence from the dual-investor-group. Pac-Basin Financ J 79: 101992. https://doi.org/10.1016/j.pacfin.2023.101992 doi: 10.1016/j.pacfin.2023.101992
    [42] Lo AW (2004) The adaptive markets hypothesis. J Portfoli Manage 30: 15–29. https://doi.org/10.3905/jpm.2004.442611 doi: 10.3905/jpm.2004.442611
    [43] Loang OK, Ahmad Z (2024) Does volatility cause herding in Malaysian stock market? Evidence from quantile regression analysis. Millennial Asia 15: 197–215. https://doi.org/10.1177/09763996221101217 doi: 10.1177/09763996221101217
    [44] Mobarek A, Mollah S, Keasey K (2014) A cross-country analysis of herd behavior in Europe. J Int Financ Mark I 32: 107–127. https://doi.org/10.1016/j.intfin.2014.05.008 doi: 10.1016/j.intfin.2014.05.008
    [45] Mulki RU, Rizkianto E (2020) Herding Behavior in BRICS Countries, during Asian and Global Financial Crisis, 34th IBIMA Conference, Madrid.
    [46] Newey WK, West KD (1987) A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica 55: 703–708. https://doi.org/10.2307/1913610 doi: 10.2307/1913610
    [47] Nguyen HM, Bakry W, Vuong THG (2023) COVID-19 pandemic and herd behavior: Evidence from a frontier market. J Behav Exp Financ 38: 100807. https://doi.org/10.1016/j.jbef.2023.100807 doi: 10.1016/j.jbef.2023.100807
    [48] Pochea MM, Filip AM, Pece AM (2017) Herding behavior in CEE stock markets under asymmetric conditions: A quantile regression analysis. J Behav Financ 18: 400–416. https://doi.org/10.1080/15427560.2017.1344677 doi: 10.1080/15427560.2017.1344677
    [49] Sharma SS, Narayan P, Thuraisamy K (2015) Time-varying herding behavior, global financial crisis, and the Chinese stock market. Rev Pac Basin Financ 18: 1550009. https://doi.org/10.1142/s0219091515500095 doi: 10.1142/s0219091515500095
    [50] Shrotryia VK, Kalra H (2020) Herding and BRICS markets: A study of distribution tails. Rev Behav Financ 14: 91–114. https://doi.org/10.1108/rbf-04-2020-0086 doi: 10.1108/rbf-04-2020-0086
    [51] Signorelli PFCL, Camilo-da-Silva E, Barbedo CHdS (2021) An examination of herding behavior in the Brazilian equity market. BBR. Brazilian Bus Rev 18: 236–254. https://doi.org/10.15728/bbr.2021.18.3.1 doi: 10.15728/bbr.2021.18.3.1
    [52] Spyrou S (2013) Herding in financial markets: A review of the literature. Rev Behav Financ 5: 175–194. https://doi.org/10.1108/rbf-02-2013-0009 doi: 10.1108/rbf-02-2013-0009
    [53] Tan L, Chiang TC, Mason JR, et al. (2008) Herding behavior in Chinese stock markets: An examination of A and B shares. Pac-Basin Financ J 16: 61–77. https://doi.org/10.1016/j.pacfin.2007.04.004 doi: 10.1016/j.pacfin.2007.04.004
    [54] Vartanian PR, dos Santos HF, da Silva WM, et al. (2022). Macroeconomic and financial variables' influence on Brazilian stock and real estate markets: A comparative analysis in the period from 2015 to 2019. Modern Economy 13: 747–769. https://doi.org/10.4236/me.2022.135040 doi: 10.4236/me.2022.135040
    [55] Vo XV, Phan DBA (2016) Herd behavior in emerging equity markets: Evidence from Vietnam. Asian J Law Econ 7: 369–383. https://doi.org/10.1515/ajle-2016-0020 doi: 10.1515/ajle-2016-0020
    [56] Zhou J, Anderson RI (2011) An empirical investigation of herding behavior in the U.S. REIT market. J Real Estate Financ Econ 47: 83–108. https://doi.org/10.1007/s11146-011-9352-x doi: 10.1007/s11146-011-9352-x
  • Reader Comments
  • © 2024 the Author(s), licensee AIMS Press. This is an open access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0)
通讯作者: 陈斌, bchen63@163.com
  • 1. 

    沈阳化工大学材料科学与工程学院 沈阳 110142

  1. 本站搜索
  2. 百度学术搜索
  3. 万方数据库搜索
  4. CNKI搜索

Metrics

Article views(343) PDF downloads(57) Cited by(0)

Article outline

Figures and Tables

Figures(1)  /  Tables(7)

Other Articles By Authors

/

DownLoad:  Full-Size Img  PowerPoint
Return
Return

Catalog