WAHYUDI, Sugeng (2017) Applying an international CAPM to herding behaviour model for integrated stock markets. Journal of International Studies, 10 (4). pp. 47-62.

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Abstract

Development of financial globalization in the form of stock market
integration experiences a trend which is getting stronger. The analysis models in
the field of finance and investments should be able to adjust to these
developments. This adjustment includes the models used to detect the existence
of herding behavior. All this time, the herding behavior model of individual
stocks towards market consensus has been referring to CAPM theory. The basic
assumption of CAPM is that financial assets at a domestic stock market are
segmented from the financial assets’ movement at the global market. Therefore,
this paper aims to provide an alternative view in the form of an international
herding model that should be applied in the context of an integrated stock market.
The model was created with reference to the international CAPM. This paper
combined ICAPM method and international CSAD model to identify herding for
eight stock markets, the sample period being from January 2003 to December
2016. The result found that for segmented stock markets, represented by China and the Philippines, herding happened for both overall the sample period and the
market crisis period. In addition, for the integrated stock markets, represented by
Indonesia, Japan, Malaysia, Singapore, Thailand, and the UK, herding behavior
was only found during the market crisis period. Therefore, classification of
market integrations should be considered in assessing the herding behaviour at
stock markets.

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