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On the impact of market mergers over herding: evidence from EURONEXT

Panagiotis Andrikopoulos (Department of Accounting and Finance – Faculty of Business and Law, De Montfort University, Leicester, UK)
Andreas Albin Hoefer (Department of Management, Business Administration and Economics, Bamberg University, Bamberg, Germany)
Vasileios Kallinterakis (Management School, University of Liverpool, Liverpool, UK)

Review of Behavioral Finance

ISSN: 1940-5979

Article publication date: 4 November 2014




The purpose of this paper is to present and empirically test for the first time the hypothesis that herding in a market increases following the market's merger in an exchange group.


The hypothesis is tested empirically in EURONEXT's four European equity markets (Belgium, France, the Netherlands and Portugal) on the premise of the Hwang and Salmon (2004) measure which allows us insight into the significance, structure and evolution of market herding. Tests are conducted for each market for the period prior to and after its merger into EURONEXT, controlling for a series of variables (market conditions, common risk factors, size) to gauge the robustness of the findings.


Results indicate that, with the exception of Portugal, herding grows in significance, yet declines in momentum post-merger. The authors ascribe the findings to EURONEXT's enhanced transparency (which makes it easier for investors to observe their peers’ trades, thus allowing them to infer and free-ride on their information) and its fast-moving informational dynamics that render herding movements shorter-lived. These results are robust when controlling for various market states and common risk factors, with deviations being observed when controlling for size and market volatility.


The study presents results for the first time on the impact of exchange mergers on herd behavior. The authors believe these to constitute useful stimulus for further research on the issue and bear important implications for regulators/policymakers in view of the ongoing proliferation of exchange mergers that has been underway since the 1990s.



The authors thank the editor, Phil Holmes, and participants at the 2012 Swiss Society of Economics and Statistics Annual Congress in Zurich, Switzerland, the 2011 British Accounting & Finance Association Conference in Aston, UK, the 60th Annual Congress of the French Association of Economic Science in Paris, France and the 71st International Atlantic Economic Conference in Athens, Greece.


Andrikopoulos, P., Albin Hoefer, A. and Kallinterakis, V. (2014), "On the impact of market mergers over herding: evidence from EURONEXT", Review of Behavioral Finance, Vol. 6 No. 2, pp. 104-135.



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