Empirical Analysis of Global Markets Herding on COVID-19 Effect

Abstract

This article investigates the presence of herding on global stock markets during COVID-19. Cross-Sectional Absolute Deviation developed by Chiang and Zheng (2010) and Chang et al. (2000) examine market-wide herding. Results show that herding is prevalent in Brazil, Germany, India, Italy, Korea, China-Shanghai, China-Shenzhen and Turkey. During the epidemic, no evidence of herding was detected in France, Hong Kong, Indonesia, Japan, Malaysia, Poland, the United Kingdom and the United States. It has been shown that the United States and Chinese cross-market herding substantially influences all markets. The impact of analyst information (target price, EPS forecasts and revenue predictions) on herding is shown before the pandemic and weakening during the pandemic. It indicates that investors disregard expert recommendations and liquidate equities during the pandemic. The findings shed light on the occurrence and determinants of herding that causes investors’ to behave irrationally during COVID-19. Policymakers, government and regulators should formulate a more robust policy to monitor, control and oversee the naïve herding that drives fundamentals away from stock prices.