Investor sentiment and herding behavior in the Korean stock market

This paper investigates herding behavior and the connection between herding behavior and investor sentiment. We apply a Cross-Sectional Absolute Deviation (CSAD) approach and the quantile regression method to capture herding behavior in the KOSPI and KOSDAQ stock markets. The analysis results are ou...

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Bibliographic Details
Published inInternational journal of financial studies Vol. 8; no. 2; pp. 1 - 14
Main Authors Choi, Ki-hong, Yoon, Seong-min
Format Journal Article
LanguageEnglish
Published Basel MDPI 01.06.2020
MDPI AG
Subjects
Behavior
Collective behavior
CSAD
Economic crisis
Economic research
herding behavior
International finance
Investments
Investor behavior
investor sentiment
Investors
Korean stock market
Prices
quantile regression
Securities markets
Stock exchanges
Stock markets
Volatility
South Korea
Hong Kong China
United Kingdom > UK
France
Japan
China
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Summary:This paper investigates herding behavior and the connection between herding behavior and investor sentiment. We apply a Cross-Sectional Absolute Deviation (CSAD) approach and the quantile regression method to capture herding behavior in the KOSPI and KOSDAQ stock markets. The analysis results are outlined as follows. First, we find that herding behavior is exhibited during down-market periods in the KOSPI and KOSDAQ stock markets. However, we show that adverse herding behavior occurs in low-trading volume and low-volatility periods. Second, according to the results of the quantile regression, herding behavior is found in the low and high quantiles of the KOSPI and KOSDAQ stock markets. However, adverse herding behavior is also found, which means that investors herd in extreme market conditions. Third, the relationship between investor sentiment and herding behavior is analyzed through regression and quantile regression, and investor sentiment is confirmed to be one of the important factors that can cause herding behavior in the Korean stock market.
ISSN:2227-7072
2227-7072
DOI:10.3390/ijfs8020034