Cross-Country Effects in Herding Behaviour : Evidence from Four South European Markets

This study provides comprehensive evidence testing for the existence of herding effects in the Portuguese, Italian, Spanish and Greek market, constructing a survivor-bias-free dataset of daily stock returns during the period January 1998 - December 2008. Moreover, it examines the potential asymmetries of herding effects with respect to the sign of the market return, trading activity and volatility. A novel feature of this study, with implications for financial stability in the Eurozone and international portfolio diversification, is to examine whether the cross-sectional dispersion of returns in one market is affected by the cross-sectional dispersion of returns in the rest three markets. Finally, it tests whether herding effects became more intense during the recent global financial crisis of 2007-2008