WAHYUDI, Sugeng (2018) Assessing the contagion effect on herding behaviour under segmented and integrated stock markets circumstances in the USA, China, and ASEAN-5. WORLD ECONOMY AND INTERNATIONAL ECONOMIC RELATIONS. pp. 15-20.

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Abstract

This paper investigates the contagion effect of herding behaviour in the US, China, and ASEAN-5 stock markets by
considering the level of market integration. We employed individual stocks and market returns on daily basis data during the global
financial crisis (GFC) and the recent tranquil periods. The sample observed consists of stocks having higher liquidity and larger
market capitalisation in each of the stock markets. We applied the cross-sectional returns dispersion approach and ordinary least
squares to achieve the purpose by involving static correlation. During the GFC period, the empirical result provides evidence on
the presence of herding transmission from the dominant stock market to other integrated markets bilaterally. Specifically, herding
behaviour in a domestic market was affected by herding activity in integrated foreign markets. By contrast, herding behaviour
in a domestic market was not affected by herding in segmented foreign markets. Comparing to the recent tranquil period of
2017-2018, the contagion effect appears on the market only during the crisis period. Therefore, market participants should be
more conservative in anticipating the emergence of this phenomenon for integrated markets under market crisis circumstances.

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