Author

  • Yudhvir Seetharam

    • University of the Witwatersrand, Johannesburg, South Africa
    • South Africa

  • James Britten

    • University of the Witwatersrand, Johannesburg, South Africa
    • South Africa

Abstract

Herding behaviour can be captured by the relationship between share price movements with the market, typified by beta. We examine herding behaviour for the period 1995 to 2011 and find that it is absent overall, yet present during bear market periods only. When examined alongside the market cycle, herding appears to dramatically fluctuate before a market contraction. Conceptually, herding can be seen as an explanatory factor for the existence of a nonlinear market model. Our findings infer that a negative market reaction (contraction) is preceded by an increase in herding. The evidence of herding in during a South African market contraction can thus impact financial forecasts and volatility estimates of the market. Further, it could possibly indicate the level of confidence of market participants – both experienced and inexperienced individuals tend to follow the group consensus in times of a market downturn, yet deviate from the group consensus in times of a market upturn.

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References

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How to Cite

Seetharam, Y., & Britten, J. (2013). An Analysis of Herding Behaviour during Market Cycles in South Africa. Journal of Economics and Behavioral Studies, 5(2), 89-98. https://doi.org/10.22610/jebs.v5i2.383

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Copyright (c) 2013 Yudhvir Seetharam, James Britten (Author)

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Research Paper

Published in

Vol. 5 No. 2 (2013) Monetary Union, Behavioural Markets & Service Quality View issue contents

Published

2013-02-28

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