Does Country Matter to Investor Herding? Evidence from an Intraday Analysis

Abstract

This study uses high-frequency intraday data to investigate country-level intraday herding behavior among global market investors and finds strong evidence of significant herding at the country level. Specifically, we find that traders tend to follow each other from one country to another. Moreover, we find that country-level herding is a combination of informed and uninformed herding, and that the contribution of uninformed herding is approximately five times greater than that of its informed counterpart. Informed country-level herding is primarily motivated by correlated signals, whereas uninformed country-level herding is influenced by momentum trading, style investing, and market pressure.

Keywords:

• Herding
• Global markets
• Intraday analysis

JEL CLASSIFICATION:

• G12
• G15

Acknowledgments

I acknowledge support from a Start-up Research Grant (SRG2018-00115-FBA) from the University of Macau. All errors are my own.

Notes

1 These stocks may have been suspended from trading over the sample period for various reasons.

2 The transaction return equals the percentage change in prices between trade t and trade t + 1.

3 According to Dufour and Engle (2000), intraday periodicity can be controlled by adding time-of-day dummies for each 30-minute interval in the normal trading session.