Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5109397 | Journal of Business Research | 2017 | 10 Pages |
Abstract
Interest rate and exchange rate are two important macroeconomic variables that exert considerable effects on the stock market. In this study, we investigate whether variations in interest and exchange rates induce herding behavior in the Chinese stock market. Empirical results indicate that interest rate increase and Chinese currency (CNY) depreciation will induce herding and this phenomenon is mainly manifested in down markets. Moreover, the herding level of the highest idiosyncratic volatility quintile portfolio is twice that of the lowest quintile portfolio which we consider evidence of intentional herding. This result is consistent with those of previous studies, which report that retail investors prefer and overweigh lottery-type stocks. Finally, we investigate the effects of monetary policy announcements and extreme exchange rate volatility on herding because these events elicit considerable public attention and may trigger collective behavior in the aggregate market.
Related Topics
Social Sciences and Humanities
Business, Management and Accounting
Business and International Management
Authors
Pu Gong, Jun Dai,