Herding in frontier markets: evidence from the Balkan region

Fotini Economou (Centre of Planning and Economic Research (KEPE), Athens, Greece)

Review of Behavioral Finance

ISSN: 1940-5979

Publication date: 12 August 2019



The purpose of this paper is to examine herding in four frontier markets in the Balkan region, namely, Bulgaria, Croatia, Romania and Slovenia, from October 2000 to December 2016.


The author employs Chang et al.’s (2000) cross-sectional dispersion approach to capture herding, while also testing for the global financial crisis’ effects and the European Union (EU)/Euro zone accession effects over herding. Potential asymmetric herding effects conditional on market performance, domestic volatility, German and US investor sentiment are also examined. Finally, the cross-market herding dynamics of the region are also explored.


Overall, Romania exhibits the most extensive evidence of herding across various estimations. The empirical results indicate that cross-market herding dynamics within the region generate stronger herding (compared to the herding observed within each stock market individually), suggesting that Balkan stock exchanges’ growing financial integration leads their herding to be “imported”, rather than domestically motivated.

Practical implications

The findings provide useful insights for regulators in frontier markets, considering the destabilising potential of herding; they are also of particular interest to the investment community for reasons of international asset allocation, diversification and hedging strategies.


This study contributes to the limited herding literature regarding frontier markets and provides novel findings regarding the herding dynamics in the Balkan region, the EU/Euro zone accession’s effect and global factors’ impact on herding estimations.



The author would like to thank an anonymous referee for the constructive comments and suggestions.


Economou, F. (2019), "Herding in frontier markets: evidence from the Balkan region", Review of Behavioral Finance, Vol. 12 No. 2, pp. 119-135. https://doi.org/10.1108/RBF-08-2018-0090



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