Open Access
Does herding affect volatility? Implications for the Spanish stock market
(Taylor & Francis, 2012) Blasco de las Heras, Natividad; Corredor Casado, María Pilar; Ferreruela Garcés, Sandra; Gestión de Empresas; Enpresen Kudeaketa
According to rational expectation models, uninformed or liquidity trading make market price volatility rise. This paper sets out to analyze the impact of herding, which may be interpreted as one of the components of uninformed trading, on the volatility of the Spanish stock market. Herding is examined at the intraday level, considered the most reliable sampling frequency for detecting this type of investor behavior, and measured using the Patterson and Sharma (2006) herding intensity measure. Different volatility measures (historical, realized and implied) are employed. The results confirm that herding has a direct linear impact on volatility for all of the volatility measures considered although the corresponding intensity is not always the same. In fact, herding variables seem to be useful in volatility forecasting and therefore in decision making when volatility is considered a key factor.
Open Access
The information environment, informed trading and volatility
(Routledge, 2017) Blasco de las Heras, Natividad; Corredor Casado, María Pilar; Gestión de Empresas; Enpresen Kudeaketa
The relation between informed trading and volatility is analyzed using the change in the proportion of informed transactions calculated through the probability of informed trading variable. The analysis relates to the Spanish market during 1997–2010, given that the Spanish market covers a very diverse range of listed companies. Some companies are comparable to companies listed on U.S. markets while others are smaller in size and have a lower trading volume and inferior quality of information. The methodology is based on a modification of the model proposed by Avramov, Chordia, and Goyal [2006]. The authors’ proposal incorporates the change in the proportion of informed transactions, calculated with intraday data, into the volatility model. The results are also presented using a conditional volatility model in which the change in the proportion of informed transactions is incorporated. These results attest to the influence of informed trading as a price-stabilizing factor in heavily traded and highly capitalized stocks (familiar stocks). Informed trading leads to a marked decrease in volatility for these particular stocks both in periods of calm and crisis.
Open Access
Can agents sensitive to cultural, organizational and environmental issues avoid herding?
(Elsevier, 2017) Blasco de las Heras, Natividad; Corredor Casado, María Pilar; Ferreruela Garcés, Sandra; Enpresen Kudeaketa; Institute for Advanced Research in Business and Economics - INARBE; Gestión de Empresas
Our findings indicate that herding behavior is affected not only by the cultural variables already discussed in the literature but also by other variables associated with organizational and environmental issues such as governance, technology, education and training, business style and conditions, and the development of equity and non-equity markets. Some of these act as catalysts, for example governance and technology. Others may have a corrective effect, such as the development of financial markets, business style, and education and training. If corrective factors are sufficiently developed, intentional herding practices could be reduced in the future.
Open Access
Market sentiment: a key factor of investors' imitative behaviour
(Wiley, 2012) Blasco de las Heras, Natividad; Corredor Casado, María Pilar; Ferreruela Garcés, Sandra; Gestión de Empresas; Enpresen Kudeaketa; Gobierno de Navarra / Nafarroako Gobernua
The aim of this paper is to explore herding behavior among investors in order to determine its rational and emotional component factors and identify relationships among them. We apply causality tests to evaluate the impact of return and market sentiment on herding intensity. The herding intensity is quantified using the measure developed by Patterson and Sharma (2006). The research was conducted during the period 1997-2003 in the Spanish stock market, where the presence of herding has been confirmed. The results reveal that the herding intensity depends on past returns and sentiment or subjective assessments and confirm the presence of both a rational and an emotional factor.
Open Access
Analysts herding: when does sentiment matter?
(Routledge, 2018) Blasco de las Heras, Natividad; Corredor Casado, María Pilar; Ferrer Zubiate, Elena; Enpresen Kudeaketa; Institute for Advanced Research in Business and Economics - INARBE; Gestión de Empresas
Herding among analysts emerges when analysts give priority to their peers’ opinions instead of their own beliefs or information. Some circumstances may enhance or restrain this type of behaviour. We postulate that market sentiment is one of them. This article analyses the effect that investor sentiment may have on analysts’ herding behaviour in the U.K. Our results suggest that ‘easy situations’ such as analysing easy-to-value securities and releasing optimistic information at times of high market sentiment clearly reduce herding practices, whereas herding clearly increases in difficult situations when analysts have to release negative information at moments of high investor sentiment.
Open Access
Detecting intentional herding: what lies beneath intraday data in the Spanish stock market
(Palgrave Macmillan, 2011) Blasco de las Heras, Natividad; Corredor Casado, María Pilar; Ferreruela Garcés, Sandra; Gestión de Empresas; Enpresen Kudeaketa
This paper examines the intentional herd behaviour of market participants, using Li´s test to compare the probability distributions of the scaled cross-sectional deviation in returns in the intraday market with the cross-sectional deviation in returns in an “artificially created” market free of intentional herding effects. The analysis is carried out for both the overall market and a sample of the most representative stocks. Additionally, a bootstrap procedure is applied in order to gain a deeper understanding of the differences across the distributions under study. The results show that the Spanish market exhibits a significant intraday herding effect that is not detected using other traditional herding measures when familiar and heavily traded stocks are analysed. Furthermore, it is suggested that intentional herding is likely to be better revealed using intraday data, and that the use of a lower frequency data may obscure results revealing imitative behaviour in the market.
Open Access
Intentional herding in stock markets: an alternative approach in an international context
(Edward Elgar, 2010) Blasco de las Heras, Natividad; Corredor Casado, María Pilar; Ferreruela Garcés, Sandra; Gestión de Empresas; Enpresen Kudeaketa; Institute for Advanced Research in Business and Economics - INARBE; Gobierno de Navarra / Nafarroako Gobernua
One of the issues of greatest concern in the world of finance is trying to understand how investors make decisions. The classic theoretical explanations are based on conditions of investor rationality and the perfection of markets, and the use of information available in the market as a decisive tool. In recent years the branch of behavioural finance has emerged strongly in the field to try to expand this vision of investor behaviour. Factors associated with the psychological and sociological behaviour of individuals have been introduced as significant elements that go some way to explain investor decisions. Thaler (1991) and Shefrin (2000), among others, have incorporated an emotional component into the classic models considering both visions as compatible and complementary. A survey of the history and contributions in this field of finance in recent years can be found in Sewell (2007).