Herding behaviour in an emerging market: Evidence from the Moscow Exchange |
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| Affiliation: | 1. Stockholm School of Economics in Riga, Strēlnieku iela 4a, Riga LV-1010, Latvia;2. SEB Latvia, Meistaru iela 1, Valdlauci, Kekavas pagasts, Kekavas novads LV-1076, Latvia;3. Kino-mo Belarus, Tolbukhina 2, office 20, Minsk 220012, Belarus;4. Department of Finance, Corvinus University of Budapest, Fővám tér 8, Budapest 1093, Hungary;1. Department of Economics, Eastern Mediterranean University, Famagusta, Turkish Republic of Northern Cyprus, via Mersin, 10, Turkey;2. Department of Economics, University of Pretoria, Pretoria 0002, South Africa;3. IPAG Business School, Paris, France;4. Department of Economics & Finance, Southern Illinois University Edwardsville, Edwardsville, IL 62026-1102, United States;5. Department of Finance & Economics, College of Industrial Management, King Fahd University of Petroleum & Minerals, Dhahran, Saudi Arabia |
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| Abstract: | This study investigates the extent to which herding towards the market consensus for Russian stocks is driven by fundamental and non-fundamental factors. We find evidence that investors on the Moscow Exchange herd without any reference to fundamentals during unanticipated financial crises coupled with high uncertainty, in falling markets, and during days with extreme upward oil price movements. In contrast, in periods of high liquidity and on days of international sanction announcements during the Ukrainian crisis, herding behaviour is merely driven by fundamentals. In Russia, macroeconomic news releases induce both information-related herding and herding without any reference to fundamentals. These results suggest that motives of investors' herding behaviour vary under specific market conditions such as market trends, liquidity, uncertainty, arrival of new information, and oil price volatility. |
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