Year: 2016
Author: Bohl, Martin T., Klein, Arne C., Siklos, Pierre L.
Credit and Capital Markets – Kredit und Kapital, Vol. 49 (2016), Iss. 2 : pp. 193–220
Abstract
Existing models of herding suffer from the drawback that conventional measures assume it is constant over time and independent of the state of the economy. This paper proposes a Markov switching herding model which supports the view that herding is not constant. By means of time-varying transition probabilities, the model is able to link changes in herding behavior with proxies for sentiment, the VIX, and the term structure. For the US stock market our estimates reveals that during periods of high volatility, investors disproportionately rely on fundamentals rather than on market consensus. Existing theory supports such a conclusion. Some policy implications are also drawn.
Journal Article Details
Publisher Name: Global Science Press
Language: English
DOI: https://doi.org/10.3790/ccm.49.2.193
Credit and Capital Markets – Kredit und Kapital, Vol. 49 (2016), Iss. 2 : pp. 193–220
Published online: 2016-06
AMS Subject Headings: Duncker & Humblot
Copyright: COPYRIGHT: © Global Science Press
Pages: 28
Keywords: G1 Herding Behavior Markov Switching US Stock Market
Author Details
| Section Title | Page | Action | Price |
|---|---|---|---|
| Martin T. Bohl / Arne C. Klein / Pierre L. Siklos: A Markov Switching Approach to Herding | 1 |