An Examination of Herding Behavior in the Brazilian Equity Market

Signorelli, Patrícia Fernanda Correia Lima; Camilo-da-Silva, Eduardo; Barbedo, Claudio Henrique da Silveira

doi:10.15728/bbr.2021.18.3.1

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Article • BBR, Braz. Bus. Rev. 18 (3) • 2021 • https://doi.org/10.15728/bbr.2021.18.3.1 copy

An Examination of Herding Behavior in the Brazilian Equity Market

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

The aim of the present study is to investigate herding behavior in the Brazilian stock market. This bias is quite common in times of market downturns and can cause investors to suffer large losses. It is very difficult to effectively identify its real occurrence. Through the method of Chang et al. (2000), it is possible to show that the occurrence of herd behavior is associated with the following phenomena: high trading volume; high volatility, market downturn; and misbalancing of orders. The main contribution of the paper is to identify that herding behavior reacts asymmetrically to the sign of past shocks. The results suggest that an intense selling movement can generate uncertainty in agents, causing them to imitate others in imminent loss periods.

KEYWORDS
Herd Behavior; Market Microstructure; Behavioral Finance

	CSSD			CSAD CSAD		CSAD
	${C S S D}_{t} = α + β_{1} D_{t}^{L} + β_{2} D_{t}^{U} + ε_{t}$			${C S A D}_{t} = α + β_{1} \|R_{m, t}\| + β_{2} R_{m, t}^{2} + ε_{t}$		${C S A D}_{t} = α + β_{1} R_{m, t} + + β_{2} \|R_{m, t}\| + β_{3} R_{m, t}^{2} + ε_{t}$
Year		Coeff.	Prob.	Coeff.	Prob.	Coeff.	Prob.
2008	`90%`	0,0323	<2e-16 ***	0,6510	<2e-16 ***	0,4016	6,6e-05 ***
						0,6824	<2e-16 ***
	`10%`	0,0285	<2e-16 ***	-0,3485	0,257	-0,7159	0,0222 *
2009	`90%`	0,0252	<2e-16 ***	0,7492	<2e-16 ***	0,0236	0,048625 *
						0,7552	<2e-16 ***
	`10%`	0,0224	<2e-16 ***	-3,1489	0,00142 **	-3,3765	6,5e-04 ***
2010	`90%`	0,0077	1,04e-09 ***	0,7571	<2e-16 ***	-0,0015	0,918
						0,7577	<2e-16 ***
	`10%`	0,0084	3,33e-11 ***	-7,2478	6e-06 ***	-7,2708	7,28e-06 ***
2011	`90%`	0,0094	6,42e-13 ***	0,5922	< 2e-16 ***	0,0269	0,038104 *
						0,5822	<2e-16 ***
	`10%`	0,0087	2,11e-11 ***	-2,8388	5e-05 ***	-2,4728	0,00061 ***
2012	`90%`	0,0091	1,19e-09 ***	0,8169	< 2e-16 ***	0,0043	0,808
						0,8192	<2e-16 ***
	`10%`	0,0078	1,22e-07 ***	-9,1488	1e-05 ***	-9,2654	1,75e-05 ***
2013	`90%`	0,0093	2,29e-07 ***	0,8155	< 2e-16 ***	0,0361	0,0393 *
						0,8120	<2e-16 ***
	`10%`	0,0074	3,84e-05 ***	-10,3100	1e-05 ***	-10,0470	1,93e-05 ***
2014	`90%`	0,0097	4,67e-07 ***	0,6553	<2e-16 ***	0,0230	0,15224
						0,6570	<2e-16 ***
	`10%`	0,0091	2,03e-06 ***	-4,4811	0,009 **	-4,5573	0,00782 **
2015	`90%`	0,0098	0,00121 **	0,9583	<2e-16 ***	0,0524	0,0364 *
						1,0120	<2e-16 ***
	`10%`	0,0058	0,05301 .	-15,8913	1e-05 ***	-0,1813	1,85e-06 ***
2016	`90%`	0,0144	1,24e-05 ***	0,5612	4e-12 ***	0,0316	0,0166
						0,5743	1,83e-12 ***
	`10%`	0,0066	0,042 *	-2,0799	0,248	-2,5743	0,160
2017	`90%`	0,0066	0,000986 ***	0,5298	<2e-16 ***	0,0100	0,72
						0,5246	<2e-16 ***
	`10%`	0,0063	0,001570 **	-1,4124	0,133	-1,2490	0,232
2018	`90%`	0,0054	0,0151 *	0,8016	4e-12 ***	0,0306	0,319
						0,7862	1,55e-11 ***
	`10%`	0,0023	0,2924	-15,3000	1e-05 ***	-0,1452	4,91e-05 ***

	Coefficient	P-Value	Residual Diagnostics
Intercept	0.000903953	0.2376	Durbin-Watson 1.8557 Do not reject H0
β1	0.017836223	0.8132	Breusch-Godfrey 0.5587 Do not reject H0
β2	-3.066689255	0.0197	Breusch-Pagan 2.4E-01 Do not reject H0

	Coefficient	P-Value	Residual Diagnostics
Intercept	0.001344269	0.0925	Durbin-Watson 2.0855128	Do not reject H0
β1	-0.188867169	0.1363	Breusch-Godfrey 0.1222209	Do not reject H0
β2	6.279777377	0.1086	Breusch-Pagan 0.1380	Do not reject H0

	Coefficient	P-Value	Residual Diagnostics
Intercept	0.001832112	0.0603	Durbin-Watson 2.133681633	Do not reject H0
β1	0.037967946	0.7424	Breusch-Godfrey 0.268953812	Do not reject H0
β2	-4.709270376	0.0745	Breusch-Pagan 0.362383126	Do not reject H0

	Coefficient	P-Value	Residual Diagnostics
Intercept	0.002122872	0.0024	Durbin-Watson 1.9696009	Do not reject H0
β1	-0.535608253	0.0000	Breusch-Godfrey 0.2065721	Do not reject H0
β2	20.024163	0.0000	Breusch-Pagan 2.21E-56	Reject H0

	Coefficient	P-Value	Residual Diagnostics
Intercept	0.001115215	0.5080	Durbin-Watson 1.6367178	Reject H0
β1	-0.25565071	0.0772	Breusch-Godfrey 0.0500165	Do not reject H0
β2	-1.191689336	0.6458	Breusch-Pagan 1.12E-08	Reject H0

	Coefficient	P-Value	Residual Diagnostics
Intercept	-0.000208127	0.8707	Durbin-Watson 1.9285454	Do not reject H0
β1	0.364755756	0.0003	Breusch-Godfrey 0.812949	Do not reject H0
β2	-5.337882441	0.0009	Breusch-Pagan 3.36E-02	Reject H0

	Coefficient	P-Value	Residual Diagnostics
Intercept	0.002699938	0.0004	Durbin-Watson 1.9356857	Do not reject H0
β1	-0.364864273	0.0000	Breusch-Godfrey 0.3518072	Do not reject H0
β2	2.579607716	0.1781	Breusch-Pagan 2.23E-02	Reject H0

	Coefficient	P-Value	Residual Diagnostics
Intercept	-0.001660192	0.0219	Durbin-Watson 2.024814071	Do not reject H0
β1	0.354638063	0.0000	Breusch-Godfrey 0.322457779	Do not reject H0
β2	-5.652267135	0.0000	Breusch-Pagan 4.22E-02	Reject H0

	Coefficient	P-Value	Residual Diagnostics
Intercept	0.001468	0.0873	Durbin-Watson 2.0188537	Do not reject H0
β1	-0.10767	0.4194	Breusch-Godfrey 0.9512567	Do not reject H0
β2	2.694552	0.4842	Breusch-Pagan 7.25E-01	Do not reject H0

	Coefficient	P-Value	Residual Diagnostics
Intercept	0.0014205	0.0742	Durbin-Watson 2.4072067	Reject H0
β1	-0.0430257	0.6171	Breusch-Godfrey 0.0277101	Reject H0
β2	-2.0768069	0.1567	Breusch-Pagan 9.45E-55	Reject H0

Fundamental Factor	25% Highest	25% Lowest
Trading Volume	Herding	No Herding
Volatility	Herding	No Herding
Stock Returns	No Herding	Herding
Sentiment	No Herding	No Herding
TIP	No Herding	Herding

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