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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