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1 – 6 of 6The purpose of this paper is to examine whether Fama–French common risk-factor portfolio investors herd on a daily basis for five developed markets, namely, Europe, Japan, Asia…
Abstract
Purpose
The purpose of this paper is to examine whether Fama–French common risk-factor portfolio investors herd on a daily basis for five developed markets, namely, Europe, Japan, Asia Pacific ex Japan, North America and Globe.
Design/methodology/approach
To examine the herd behavior of common risk-factor portfolio investors, this paper utilizes the cross-sectional absolute deviations (CSAD) methodology, covering a daily data sampling period of July 1990 to January 2019 from Kenneth R. French-Data Library. CSAD driven by fundamental and non-fundamental information is assessed using Fama–French five-factor model.
Findings
The results do not provide evidence for herding under normal market conditions, either when reacting to fundamental information or non-fundamental information, for any region under consideration. However, Fama–French common risk-factor portfolio investors mimic the underlying risk factors in returns related to size and book-to-market value, size and operating profitability, size and investment and size and momentum of the equity stocks in European and Japanese markets during crisis period. Also, no considerable evidence is found for herding (on fundamental information) under crisis and up-market conditions except for Japan. Ancillary findings are discussed under conclusion.
Research limitations/implications
Further research on new risk factors explaining stock return variation may help improve the model performance. The performance can be improved by adding new risk factors that are free from behavioral bias but significant in explaining common stock return variation. Also, it is necessary to revisit the existing common risk factors in order to understand behavioral aspects that may affect cost of capital calculations (e.g. pricing errors) and valuation of investment portfolios.
Originality/value
This is the first paper that examines the herd behavior (fundamental and non-fundamental) of Fama–French common risk-factor investors using five-factor model.
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Keywords
The purpose of this paper is to examine the evidence of herding phenomenon, spill-over effects related to herding and whether herding is driven by fundamentals or non-fundamentals…
Abstract
Purpose
The purpose of this paper is to examine the evidence of herding phenomenon, spill-over effects related to herding and whether herding is driven by fundamentals or non-fundamentals for various sub-periods and sub-samples.
Design/methodology/approach
The cross-sectional absolute deviation model is applied to China’s A- and B-share markets in combination with fundamental information.
Findings
Herding is prevalent on both A- and B-share markets. In detail, investors on A-share market herd for small and growth stock portfolios irrespective of market states while they only herd for large or value stocks in down market, therefore leading the whole herding behaviour to be pronounced in down market. Comparatively, on B-share market, herding is robust for various investment styles (small or large, value or growth) or market situations. Additionally, spill-over effects related to herding do not exist no matter from A-shares to B-shares or from B-shares to A-shares. Moreover, investors on B-share markets tend to herd as the response to non-fundamental information more frequently during financial crisis.
Originality/value
Investors on A- and B-share markets tend to herd as the response to non-fundamental information more frequently during financial crisis. Analysing the herding behaviours could be helpful in controlling the financial risk.
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Yongwon Kim, Inwook Song and Young Kyu Park
Using overlapped portfolio data on public equity funds in Korea, the authors construct several types of fund-stock weighted bipartite networks and measure fund network centrality…
Abstract
Using overlapped portfolio data on public equity funds in Korea, the authors construct several types of fund-stock weighted bipartite networks and measure fund network centrality. The authors also examine the relationship between network centrality and fund investment performance. The authors' results are three-fold. First, the authors find that the fund centrality of the network in which funds and stocks are connected based on the most active investing behavior positively affects the fund performance. Second, the funds with a high centrality level based on the same network generate higher returns by holding stocks with high value uncertainty. Third, the authors find that fund centrality is not associated with herd behavior. Based on these results, the authors argue that fund centrality is a proxy of information advantage and skill of fund managers. The authors' paper shows that network analysis could be a new way to identify funds with better performance and measure the skill and information advantage to construct an optimal portfolio.
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Abdollah Ah Mand, Hawati Janor, Ruzita Abdul Rahim and Tamat Sarmidi
The purpose of this paper is to investigate whether market conditions have an effect on investors’ propensity to herd in an emerging economy’s stock market. Additionally, given…
Abstract
Purpose
The purpose of this paper is to investigate whether market conditions have an effect on investors’ propensity to herd in an emerging economy’s stock market. Additionally, given the lack of research on Islamic behavioral finance, the authors further investigate if the herding phenomenon is distinct in Islamic versus conventional stocks.
Design/methodology/approach
The authors used daily data for the period of 1995–2016 according to the herding behavior model of Chang et al. (2000), which relies on cross-sectional absolute deviation of returns.
Findings
Findings reveal the herding behavior of investors among Shariah-compliant during up and down market exits with non-linear relationship to the market return, while for conventional stocks herding behavior does not exist with linear nor nonlinear relationships during the up and down market. Furthermore, for the whole market, herding behavior only exists during upmarket with a nonlinear relationship to the market return. However, this relationship is not significant. Moreover, the results of this study are robust with respect to the effect of the Asian and global financial crisis.
Practical implications
The findings are useful for investors to identify which market conditions are associated with rational and irrational behavior of investors.
Originality/value
Most of the theoretical and empirical studies on herding behavior have focused on developed countries. Only a few studies have paid attention to the herding behavior in Islamic financial markets, particularly in the context of an emerging market such as Malaysia. This study fills this void.
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Sándor Erdős and Patrik László Várkonyi
The purpose of this study is to examine herd behaviour under different market conditions, examine the potential impact of the firm size and stock characteristics on this…
Abstract
Purpose
The purpose of this study is to examine herd behaviour under different market conditions, examine the potential impact of the firm size and stock characteristics on this relationship, and explore how herding affects market prices in the German market.
Design/methodology/approach
The authors apply a method that does not rely on theoretical models, thus eliminating the biases inherent in their application. This technique is based on the assumption that macro herding manifests itself in the synchronicity (comovement) of stock returns.
Findings
The study’s findings show that herding is more pronounced in down markets and is more pronounced when market returns reach extreme levels. Additionally, the authors have found that there is stronger herding among large companies compared to small companies, and that stock characteristics considered have no effect on the degree of macro herding. Results also suggest that the contemporaneous market-wide information drives macro herding and that macro herding facilitates the incorporation of market-wide information into prices.
Practical implications
The study’s results strongly support the idea of directional asymmetry, which holds that stocks react quickly to negative macroeconomic news while small stocks react slowly to positive macroeconomic news. Additionally, the study’s results suggest that the contemporaneous market-wide information drives macro herding and that macro herding facilitates the rapid incorporation of market-wide information into prices.
Originality/value
To the best of the researchers’ knowledge, this is the first study that examines macro herding for a major financial market using a herding measure based on the co-movement of returns that does not rely on theoretical models.
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Nadeem Rais, Akash Ved, Mohd. Shadab, Rizwan Ahmad and Mohammad Shahid
Taurine (2-aminoethane sulfonic acid; C2H7NO3S) is a nonprotein sulfur-containing β-amino acid present in nearly all mammalian tissues and the most ubiquitous free endogenous…
Abstract
Purpose
Taurine (2-aminoethane sulfonic acid; C2H7NO3S) is a nonprotein sulfur-containing β-amino acid present in nearly all mammalian tissues and the most ubiquitous free endogenous biomolecule in human cells. Taurine is commonly known as a conditionally essential amino acid because taurine is one of the few amino acids that are not incorporated in protein synthesis. The purpose of this study is to review the existing articles related to taurine and to give an account how useful is taurine to the different body systems. In this thorough overview, taurine is covered in terms of its essentiality, sources, advantages for neonates and the elderly, the effects of taurine deficiency, and the safety and toxicity of taurine supplements.
Design/methodology/approach
This is a narrative review into the subject matter. Published articles were searched on different portals like PubMed, EMBASE, Scopus, Google Scholar, PubChem etc. The authors also evaluated the availability of taurine in commercially available energy drinks.
Findings
This comprehensive review, presents the potential clinical benefits and functional properties of taurine as a conditionally essential amino acid. Energy drinks containing taurine (and their concentration) are also reported in this review.
Originality/value
This is the first data that the authors are aware of that shows taurine content in a variety of energy drinks on the market.
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