Skip to main content
SpringerLink
Log in

Empirical Models of Herding Behaviour for Asian Countries with Confucian Culture

  • Conference paper
  • First Online:
Predictive Econometrics and Big Data (TES 2018)

Part of the book series: Studies in Computational Intelligence ((SCI,volume 753))

Included in the following conference series:

Abstract

The purpose of this study is to investigate the insights of herding behavior in the Confucian markets by conducting a set of empirical tests. More specifically this study investigates a sample of 7 countries and 13 markets to gain a deeper understanding of the causes of herding behavior and the potential factors that cause investors to behave in a group manner. Following a comprehensive review of the existing methodologies on herding behavior this study employs return dispersion approaches and herding tests developed by Chang et al. (2000) and Tan et al. (2008). This study investigates a sample of 13 stock markets of seven Asian economies with three different hypotheses. Those economies, which are considered to have Confucian culture, are mainland China, Hong Kong, Japan, South Korea, Taiwan, Singapore, and Vietnam. The hypotheses of this study aim to investigate formation of herding behavior in different market and economic circumstances. In testing the empirical models, this study uses OLS regression for the main test as well as regression with Newey and West (1987) for the robustness test of each result from OLS regression analysis. Data of this study consists of 13 index returns (Shanghai A and B share, Shenzhen A and B share, Hang Seng index, NIKKEI225, TOPIX, KOSDAQ, KOSPI, Straits Times Index, TAIEX, and indices of Hanoi and Hochiminh city Stock Exchanges) and returns of their constituent stocks. The time period of the sample data is from January 01, 1999 to December 31, 2014. All data were collected from the Thomson Reuters Datastream database. According to the empirical findings, all hypotheses are accepted. The sample markets demonstrate significant herding behavior in general and significant herding behavior in different markets conditions, such as in rising-falling markets and high-low market volatility states. This study has some major contributions to the literature of herding behavior and the link between herding behavior and cultural aspects. First, this study uses dataset of 13 Confucian stock markets of seven Asian economies, with time range from 1999 to 2014. Second, this research developed and tested three different hypotheses, and all of them are accepted. Third, this study adds the new dimension of the cultural aspects in order try to explain the root causes to herding behavior among investors in the equity markets. Recognizing that the Confucian culture appears to be one of the most influential cultural aspects in management, this study examines herding behavior of Confucian culture in stock markets under the umbrella of one empirical study. According to the findings of this study, Confucian culture has a positive and significant effect on herding behavior among investors in equity markets.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 259.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 329.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 329.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    A shares are shares of the Renminbi currency that are purchased and traded on the Shanghai and Shenzhen stock exchanges. This is contrast to Renminbi B shares, which are owned by foreigners who cannot purchase A-shares due to Chinese government restrictions.

References

  • Aggarwal, R., Kearney, C., Lucey, B.: Gravity and culture in foreign portfolio investment. J. Bank. Fin. 36(2), 525–538 (2012)

    Article  Google Scholar 

  • Beckmann, D., Menkhoff, L., Suto, M.: Does culture influence asset managers’ views and behavior? J. Econ. Behav. Organ. 67(3), 624–643 (2008)

    Article  Google Scholar 

  • Bhaduri, S.N., Mahapatra, S.D.: Applying an alternative test of herding behavior: a case study of the Indian stock market. J. Asian Econ. 25, 43–52 (2013)

    Article  Google Scholar 

  • Chang, E.C., Cheng, J.W., Khorana, A.: An examination of herd behavior in equity markets: an international perspective. J. Bank. Fin. 24(10), 1651–1679 (2000)

    Article  Google Scholar 

  • Chang, C.H., Lin, S.J.: The effects of national culture and behavioral pitfalls on investors’ decision-making: herding behavior in international stock markets. Int. Rev. Econ. Fin. 37, 380–392 (2015)

    Article  Google Scholar 

  • Chiang, T.C., Zheng, D.: An empirical analysis of herd behavior in global stock markets. J. Bank. Fin. 34(8), 1911–1921 (2010)

    Article  Google Scholar 

  • Chiang, T.C., Li, J., Tan, L.: Empirical investigation of herding behavior in Chinese stock markets: evidence from quantile regression analysis. Glob. Fin. J. 21(1), 111–124 (2010)

    Article  Google Scholar 

  • Chow, C.W., Shields, M.D., Chan, Y.K.: The effects of management controls and national culture on manufacturing performance: an experimental investigation. Account. Organ. Soc. 16(3), 209–226 (1991)

    Article  Google Scholar 

  • Christie, W.G., Huang, R.D.: Following the pied piper: do individual returns herd around the market? Finan. Anal. J. 51(4), 31–37 (1995)

    Article  Google Scholar 

  • Demirer, R., Kutan, A.M.: Does herding behavior exist in Chinese stock markets? J. Int. Finan. Mark. Inst. Money 16(2), 123–142 (2006)

    Article  Google Scholar 

  • Demirer, R., Kutan, A.M., Chen, C.D.: Do investors herd in emerging stock markets? Evidence from the Taiwanese market. J. Econ. Behav. Organ. 76(2), 283–295 (2010)

    Article  Google Scholar 

  • Economou, F., Kostakis, A., Philippas, N.: Cross-country effects in herding behaviour: evidence from four south European markets. J. Int. Finan. Mark. Inst. Money 21(3), 443–460 (2011)

    Article  Google Scholar 

  • Ferris, S.P., Jayaraman, N., Sabherwal, S.: CEO overconfidence and international merger and acquisition activity. J. Finan. Quant. Anal. 48(01), 137–164 (2013)

    Article  Google Scholar 

  • Fu, T., Lin, M.: Herding in China equity market. Int. J. Econ. Finan. 2(2), 148 (2010)

    Google Scholar 

  • Gleason, K.C., Mathur, I., Peterson, M.A.: Analysis of intraday herding behavior among the sector ETFs. J. Empir. Finan. 11(5), 681–694 (2004)

    Article  Google Scholar 

  • Holderness, C.G.: The myth of diffuse ownership in the United States. Rev. Finan. Stud. 22(4), 1377–1408 (2009)

    Article  Google Scholar 

  • Hofstede, G.H.: Culture’s Consequences: Comparing Values, Behaviors. Institutions and Organizations Across Nations. Sage, Thousand Oaks (2001)

    Google Scholar 

  • Hwang, S., Salmon, M.: Market stress and herding. J. Empir. Finan. 11(4), 585–616 (2004)

    Article  Google Scholar 

  • Jansen, D.W., Tsai, C.L.: Monetary policy and stock returns: financing constraints and asymmetries in bull and bear markets. J. Empir. Finan. 17(5), 981–990 (2010)

    Article  Google Scholar 

  • Kurov, A.: Investor sentiment and the stock market’s reaction to monetary policy. J. Bank. Finan. 34(1), 139–149 (2010)

    Article  Google Scholar 

  • Lao, P., Singh, H.: Herding behaviour in the Chinese and Indian stock markets. J. Asian Econ. 22(6), 495–506 (2011)

    Article  Google Scholar 

  • Li, K., Griffin, D., Yue, H., Zhao, L.: How does culture influence corporate risk-taking? J. Corp. Finan. 23, 1–22 (2013)

    Article  Google Scholar 

  • McQueen, G., Pinegar, M., Thorley, S.: Delayed reaction to good news and the cross-autocorrelation of portfolio returns. J. Finan. 51(3), 889–919 (1996)

    Article  Google Scholar 

  • Mobarek, A., Mollah, S., Keasey, K.: A cross-country analysis of herd behavior in Europe. J. Int. Finan. Mark. Inst. Money 32, 107–127 (2014)

    Article  Google Scholar 

  • My, T.N., Truong, H.H.: Herding behavior in an emerging stock market: empirical evidence from Vietnam. Res. J. Bus. Manag. 5(2), 51–76 (2011)

    Article  Google Scholar 

  • Newey, W.K., West, K.: A simple positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica 55, 703–708 (1987)

    Article  MathSciNet  MATH  Google Scholar 

  • Siegel, J.I., Licht, A.N., Schwartz, S.H.: Egalitarianism and international investment. J. Finan. Econ. 102(3), 621–642 (2011)

    Article  Google Scholar 

  • Tan, L., Chiang, T.C., Mason, J.R., Nelling, E.: Herding behavior in Chinese stock markets: an examination of A and B shares. Pacific-Basin Finan. J. 16(1), 61–77 (2008)

    Article  Google Scholar 

  • Treynor, J., Mazuy, K.: Can mutual funds outguess the market? Harvard Bus. Rev. 44(4), 131–136 (1966)

    Google Scholar 

  • Xue, M., Cheng, W.: National culture, market condition and market share of foreign bank. Econ. Model. 33, 991–997 (2013)

    Article  Google Scholar 

  • Yao, J., Ma, C., He, W.P.: Investor herding behaviour of Chinese stock market. Int. Rev. Econ. Finan. 29, 12–29 (2014)

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. School of International, Relations and Public Administration, National University of Mongolia, Ulan Bator, Mongolia

    Munkh-Ulzii

  2. Department of Business Administration, College of Management, Asia University, Taichung, Taiwan

    Massoud Moslehpour

  3. International Business Faculty, Banking University, Ho Chi Minh City, Vietnam

    Pham Van Kien

Authors
  1. Munkh-Ulzii
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Massoud Moslehpour
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Pham Van Kien
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Massoud Moslehpour .

Editor information

Editors and Affiliations

  1. Computer Science Department, University of Texas at El Paso, El Paso, Texas, USA

    Vladik Kreinovich

  2. International College, Chiang Mai University, Chiang Mai, Thailand

    Songsak Sriboonchitta

  3. International College, Chiang Mai University, Chiang Mai, Thailand

    Nopasit Chakpitak

Rights and permissions

Reprints and permissions

Copyright information

© 2018 Springer International Publishing AG

About this paper

Check for updates. Verify currency and authenticity via CrossMark

Cite this paper

Munkh-Ulzii, Moslehpour, M., Van Kien, P. (2018). Empirical Models of Herding Behaviour for Asian Countries with Confucian Culture. In: Kreinovich, V., Sriboonchitta, S., Chakpitak, N. (eds) Predictive Econometrics and Big Data. TES 2018. Studies in Computational Intelligence, vol 753. Springer, Cham. https://doi.org/10.1007/978-3-319-70942-0_34

Download citation

  • DOI: https://doi.org/10.1007/978-3-319-70942-0_34

  • Published:

  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-319-70941-3

  • Online ISBN: 978-3-319-70942-0

  • eBook Packages: EngineeringEngineering (R0)

Publish with us

Policies and ethics

Search

Navigation