Empirical Models of Herding Behaviour for Asian Countries with Confucian Culture

摘要

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 amonginvestors 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.