Herd behaviour in the Turkish banking sector

Abstract

This study looks for evidence of investor herding in the Turkish banking sector. We apply the methodology of Chang et al. (2000) to daily stock returns between 2007 and 2012 and find evidence of herding. This result is robust under model specifications that control for market and firm fundamentals. Herding behaviour shows asymmetric effects, and investors herd only in rising markets.

Keywords:

• herding behaviour
• banking sector
• asymmetric behaviour

JEL Classification:

• G15
• G14

Notes

¹  For a detailed summary of the methodology in herding literature, see Andreu et al. (2009).

²  This number was compiled from the data provided by the Turkish Central Registry Agency and reports were compiled from the Capital Markets Board of Turkey. (https://www.mkk.com.tr/wps/portal/MKK and http://serpam.istanbul.edu.tr/wp-content/uploads/2012/09/Türkiye-Sermaye-Piyasası-Raporu-20111.pdf)

³  The return dispersion measure, used in this article, was calculated as the cross-sectional market deviation given in Christie and Huang (1995), named as cross-sectional SD (CSSD). We did not use the absolute deviation formula given as in Chang et al. (2000).