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.