Download or read book Herd Behavior Towards the Market Index written by Daxue Wang and published by . This book was released on 2009 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses the cross-sectional variance of the betas to study herd behavior towards market index in major developed and emerging financial markets (categorized as developed group, Asian group, and Latin American group). We propose a robust regression technique to calculate the betas of the CAPM and those of the Fama-French three-factor model, with an intention to diminish the impact of multivariate outliers in return data. Through the estimated values obtained from a state space model, we examine the evolution of herding measures, especially their pattern around sudden events such as the 1997-1998 financial crises. This 1997-1998 turmoil turns out to have formed a turning point for most of the financial markets. We document a higher level of herding in emerging markets than in developed markets. We also find that the correlation of herding between two markets from the same group is higher than that between two markets from different groups. This paper will shed light on the calculation of beta and on the financial policy to understand the dynamics of herding in financial markets.

Download or read book Herd Behavior in Financial Markets written by Sushil Bikhchandani and published by . This book was released on 2000 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Herd Behavior Index written by Jan Dhaene and published by . This book was released on 2015 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We introduce a new and easy to calculate measure for systemic risk in financial markets. This measure is baptized the Herd Behavior Index (HIX). It is model independent and forward looking, based on observed option data.In order to determine the degree of systemic risk or herd behavior in a financial market one should compare the observed market situation with the extreme (theoretical) situation under which the whole system is driven by a single factor.The Herd Behavior Index (HIX) is defined as the ratio of an option-based estimate of the risk-neutral variance of the market index and an option-based estimate of the corresponding variance of this extreme market situation. Using the theory of comonotonicity, the extreme situation can easily be backed out of the observed option quotes.The HIX can be determined for any market index provided an appropriate series of vanilla options is traded on this index as well as on its components. As an illustration, we determine historical values of the 30-days implied Herd Behavior Index for the Dow Jones Industrial Average, covering the period January 2003 to October 2009.

Download or read book Hedge Funds and Financial Market Dynamics written by Mrs.Anne Jansen and published by International Monetary Fund. This book was released on 1998-05-15 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hedge funds are collective investment vehicles, often organized as private partnerships and resident offshore for tax and regulatory purposes. Their legal status places few restrictions on their portfolios and transactions, leaving their managers free to use short sales, derivative securities, and leverage to raise returns and cushion risk. This paper considers the role of hedge funds in financial market dynamics, with particular reference to the Asian crisis.

Download or read book Contemporary Issues in Behavioral Finance written by Simon Grima and published by Emerald Group Publishing. This book was released on 2019-07-04 with total page 259 pages. Available in PDF, EPUB and Kindle. Book excerpt: This special edition of Contemporary Studies in Economic and Financial Analysis offers seventeen chapters from invited participants in the International Applied Social Science Congress, held in Turkey between the 19th and 21st April 2018.

Download or read book Herd Behavior in Financial Markets written by Sushil Bikhchandani and published by . This book was released on 2005 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Policymakers often express concern that herding by financial market participants destabilizes markets and increases the fragility of the financial system. This paper provides an overview of the recent theoretical and empirical research on herd behavior in financial markets. It addresses the following questions: What precisely do we mean by herding? What could be the causes of herd behavior? What success have existing studies had in identifying such behavior? And what effect does herding have on financial markets?

Download or read book Herd Behavior in Financial Markets written by Marco Cipriani and published by . This book was released on 2008 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book An Examination of Herd Behavior in International Equity Markets written by Eric C. Chang and published by . This book was released on 1997 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Herding During Market Upturns and Downturns written by Houda Ben Mabrouk and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper applies two methodologies of herding to a number of stock markets in Africa, Asia, Europe, and America, and examines how the returns behave with regard to movements in the MSCI world index. We separate the upturns and downturns in detecting the herd behavior. The results show that the herding behavior is asymmetric to the market turns. We demonstrate that herding is significantly higher during market upturns, which contradicts the earlier findings. The results of the ARCH model for herding behavior further support the asymmetric view, and the results of EGARCH(1, 1) model for herding behavior indicate that the new measure is more accurate in detecting the herding bias. Further, the Granger causality test shows that the new herding model generates both market returns and volatility. Finally, we find that the new measure implies that herding depends on four components: a constant term which means that herding exists whatever the market conditions are; a second component indicating that herding in period t depends on the herding behavior in period t - 1; a third parameter indicating that herding depends on the asymmetric reaction to downturns and upturns; and a fourth component meaning that herding in period t is dependent on the amplitude of the shock of the previous period.

Download or read book Herd Behavior and Aggregate Fluctuations in Financial Markets written by Rama Cont and published by . This book was released on 1998 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present a simple model of a stock market where a random communication structure between agents gives rise to a heavy tails in the distribution of stock price variations in the form of an exponentially truncated power-law, similar to distributions observed in recent empirical studies of high frequency market data. Our model provides a link between two well-known market phenomena: the heavy tails observed in the distribution of stock market returns on one hand and 'herding' behavior in financial markets on the other hand. In particular, our study suggests a relation between the excess kurtosis observed in asset returns, the market order flow and the tendency of market participants to imitate each other.

Download or read book High Returns from Low Risk written by Pim van Vliet and published by John Wiley & Sons. This book was released on 2017-01-17 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt: Believing "high-risk equals high-reward" is holding your portfolio hostage High Returns from Low Risk proves that low-volatility, low-risk portfolios beat high-volatility portfolios hands down, and shows you how to take advantage of this paradox to dramatically improve your returns. Investors traditionally view low-risk stocks as safe but unprofitable, but this old canard is based on a flawed premise; it fails to see beyond the monthly horizon, and ignores compounding returns. This book updates the thinking and brings reality to modelling to show how low-risk stocks actually outperform high-risk stocks by an order of magnitude. Easy to read and easy to implement, the plan presented here will help you construct a portfolio that delivers higher returns per unit of risk, and explains how to achieve excellent investment results over the long term. Do you still believe that investors are rewarded for bearing risk, and that the higher the risk, the greater the reward? That old axiom is holding you back, and it is time to start seeing the whole picture. This book shows you, through deep historical simulation, how to reap the rewards of smarter investing. Learn how and why low-risk, low-volatility stocks beat the market Discover the formula that outperforms Greenblatt's Construct your own low-risk portfolio Select the right ETF or low-risk fund to manage your money Great returns and lower risk sound like a winning combination — what happens once everyone is doing it? The beauty of the low-risk strategy is that it continues to work even after the paradox is widely known; long-term investment success is possible for anyone who can shake off the entrenched wisdom and go low-risk. High Returns from Low Risk provides the proof, model and strategy to reign in your exposure while raking in the profit.

Download or read book Herd Behavior and Fat Tails in Financial Markets written by Makoto Nirei and published by . This book was released on 2006 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper demonstrates that a generic herd behavior model generates a fat-tailed distribution of traders' aggregate actions. We consider a simultaneous-move game of traders who infer other traders' private information on the value of assets by observing their actions and decide whether to buy the asset or not. The number of buying actions in a Bayesian Nash equilibrium is characterized by a sum of a binomial process by introducing a fictitious tatonnement. Under a broad class of distributions for the private information, we show that the aggregate actions follow a power-law distribution with an exponential truncation. The empirical distribution of the daily returns of Samp;P 500 stocks is fitted by the model prediction, when the aggregate actions are translated into price movements either by an empirical volume-price impact function or by a market-maker who sets the price by incorporating the available information. This model nests the benchmark herd behavior model and the recent models of critical phenomena in the network of traders. The latter showed that the aggregate actions follow a power-law tailed distribution when the connectivity of networked traders is set at a critical level. In this context, we provide an economic reason why at all the rational herding behavior exhibits criticality in a general setting. Suppose that a good private information leads a trader to buy, whereas the other traders do not buy despite their observation of the action. Then their inactions reveal their private information partially. The total impact of the action on the revealed information is thus of order 1/N, where N is the total number of traders, if the private information is equally informative across the traders. When this is the case, the mean impact of the initial action on the other actions is roughly equal to one. The tatonnement triggered by the initial action becomes a martingale, in which the distribution of the total number of buying actions during the tatonnement exhibits a power-law tail. We further show that, when the static game is repeated over time, the triggering action almost surely occurs and the mean impact of the action in the chain reaction evolves toward the critical level. This implies that the rational learning of traders self-organizes their beliefs to the critical state at which a power-law clustering of actions emerges.

Download or read book Rumors in Financial Markets written by Mark Schindler and published by John Wiley & Sons. This book was released on 2007-04-04 with total page 210 pages. Available in PDF, EPUB and Kindle. Book excerpt: On the trading floor, all action is based on news, therefore rumors in financial markets are an everyday phenomenon. Rumors are the oldest mass medium in the world and their nature is still difficult to grasp. Scientifically, not much is known about rumors, especially in the financial markets, where their consequences can have real money consequences. Rumors in Financial Markets provides a fresh insight to the topic, combining the theory of Behavioral Finance with that of Experimental Finance--a new and innovative scientific method which observes real decision makers in a controlled, clearly structured environment. Using the results from surveys and experiments, the author argues that rumors in the context of financial markets are built on three cornerstones: Finance, Psychology and Sociology. The book provides insights into how rumors evolve, spread and are traded on and provides explanations as to why volatility rockets, strong price movements, herding behavior for example, occur for apparently no good reason.

Download or read book Correlated Trades and Herd Behavior in the Stock Market written by Simon Jurkatis and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Herd behavior is often viewed as a significant threat for the stability and effciency of financial markets. This paper sheds new light on the relevance of herd behavior for observed correlation of trades. We introduce numerical simulations of a herd model to derive theory-guided predictions regarding the impact of various aspects of uncertainty on herding intensity. We test the predictions using a novel data set including all real-time transactions of institutional investors in the German stock market. In light of the model simulations, empirical results strongly suggest that the observed correlation of trades is mainly due to the common reaction of investors to new public information and should not be misinterpreted as herd behavior. -- Herd Behavior ; Institutional Trading ; Correlated Trading ; Model Simulation

Download or read book Beyond Traditional Probabilistic Methods in Economics written by Vladik Kreinovich and published by Springer. This book was released on 2018-11-24 with total page 1157 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents recent research on probabilistic methods in economics, from machine learning to statistical analysis. Economics is a very important – and at the same a very difficult discipline. It is not easy to predict how an economy will evolve or to identify the measures needed to make an economy prosper. One of the main reasons for this is the high level of uncertainty: different difficult-to-predict events can influence the future economic behavior. To make good predictions and reasonable recommendations, this uncertainty has to be taken into account. In the past, most related research results were based on using traditional techniques from probability and statistics, such as p-value-based hypothesis testing. These techniques led to numerous successful applications, but in the last decades, several examples have emerged showing that these techniques often lead to unreliable and inaccurate predictions. It is therefore necessary to come up with new techniques for processing the corresponding uncertainty that go beyond the traditional probabilistic techniques. This book focuses on such techniques, their economic applications and the remaining challenges, presenting both related theoretical developments and their practical applications.

Download or read book Investor Behavior written by H. Kent Baker and published by John Wiley & Sons. This book was released on 2014-02-10 with total page 645 pages. Available in PDF, EPUB and Kindle. Book excerpt: WINNER, Business: Personal Finance/Investing, 2015 USA Best Book Awards FINALIST, Business: Reference, 2015 USA Best Book Awards Investor Behavior provides readers with a comprehensive understanding and the latest research in the area of behavioral finance and investor decision making. Blending contributions from noted academics and experienced practitioners, this 30-chapter book will provide investment professionals with insights on how to understand and manage client behavior; a framework for interpreting financial market activity; and an in-depth understanding of this important new field of investment research. The book should also be of interest to academics, investors, and students. The book will cover the major principles of investor psychology, including heuristics, bounded rationality, regret theory, mental accounting, framing, prospect theory, and loss aversion. Specific sections of the book will delve into the role of personality traits, financial therapy, retirement planning, financial coaching, and emotions in investment decisions. Other topics covered include risk perception and tolerance, asset allocation decisions under inertia and inattention bias; evidenced based financial planning, motivation and satisfaction, behavioral investment management, and neurofinance. Contributions will delve into the behavioral underpinnings of various trading and investment topics including trader psychology, stock momentum, earnings surprises, and anomalies. The final chapters of the book examine new research on socially responsible investing, mutual funds, and real estate investing from a behavioral perspective. Empirical evidence and current literature about each type of investment issue are featured. Cited research studies are presented in a straightforward manner focusing on the comprehension of study findings, rather than on the details of mathematical frameworks.

Download or read book Handbook of Investors Behavior during Financial Crises written by Fotini Economou and published by Academic Press. This book was released on 2017-06-24 with total page 516 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook of Investors' Behavior during Financial Crises provides fundamental information about investor behavior during turbulent periods, such the 2000 dot com crash and the 2008 global financial crisis. Contributors share the same behavioral finance tools and techniques while analyzing behaviors across a variety of market structures and asset classes. The volume provides novel insights about the influence and effects of regional differences in market design. Its distinctive approach to studies of financial crises is of key importance in our contemporary financial landscape, even more so since the accelerated process of globalization has rendered the outbreak of financial crises internationally more commonplace compared to previous decades. Encompasses empirical, quantitative and regulation-motivated studies Includes information about retail and institutional investor behavior Analyzes optimal financial structures for the development and growth of specific regional economies