An examination of herd behavior in equity markets: An international perspective

We examine the investment behavior of market participants within different international markets (i.e,, US, Hong Kong, Japan, South Korea, and Taiwan) , specifically with regard to their tendency to exhibit herd behavior. We f ind no evidence of herding on the part of market participants in the US and Hong Kong and partial evidence of herding in Japan. However, for South Kor ea and Taiwan, the two emerging markets in our sample, we document signific ant evidence of herding. The results are robust across various size-based p ortfolios and over time. Furthermore, macroeconomic information rather than firm-specific information tends to have a more significant impact on inves tor behavior in markets which exhibit herding. In all five markets, the rat e of increase in security return dispersion as a function of the aggregate market return is higher in up market, relative to down market days. This is consistent with the directional asymmetry documented by McQueen et al. (19 96) (McQueen, G,, Pinegar, M.A., Thorley, S., 1996. Journal of Finance 51, 889-919). (C) 2000 Elsevier Science B.V. All rights reserved. JEL classific ation: G15.