Herding Behavior during the Subprime Mortgage Crisis: Evidence from Six Asia-Pacific Stock Markets

Yih-Wenn Laih, Yung-Shi Liau


This study examines herding behavior in six Asia-Pacific stock markets, namely, Taiwan, China, South Korea, Singapore, Hong Kong, and Japan, during a period of turmoil, particularly the latest subprime mortgage crisis. We find no evidence of herding in the stock markets of Singapore and Hong Kong, and only partial evidence of herding in the stock markets of South Korea and Japan. However, we document significant evidence of herding in the stock markets of Taiwan and China. This result suggests that herding is more pronounced in developing nations, where markets are dominated by individual investors and where daily price limits are observed. Furthermore, we empirically verify and visually corroborate the comparative co-movement behavior between markets with respect to the “home bias reflection hypothesis” and the degree of market openness. Finally, we find apparent herding behavior in a rising market state and during post-crisis period.

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DOI: http://dx.doi.org/10.5539/ijef.v5n7p71

International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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