Investor attention to the Eurozone crisis and herding effects in national bank stock indexes

•There are evident herding effects in European banking sector.•Investor attention to the Eurozone crisis explains the herding effect.•Herding effects in the EMU region affect herding affects in the non-EMU region.

In this study, we investigate the relation between investor attention to the Eurozone crisis and herding effects in national bank stock indexes across Europe. We especially focus on two different groups of European countries: non-EMU member countries and EMU member countries. Our results suggest that an increased investor attention to the Eurozone crisis decreased herding effects in the EMU region in the following week, but the effect was temporary as the effect became the opposite with a two-week lag. Herding effects in the EMU region affected herding effects in the non-EMU region, but not vice versa.