Sectoral Herding and Contagion effect: Pre and during COVID-19 crisis

Faisal Hasan Bukhari, Habib Ahmad, Hasan Hanif

Abstract


This article investigates herding contagion of investor using aggregate market datasets and industries datasets of Chinese stock market (Shanghai stock market) and Pakistani Stock market (Karachi stock market). We employed daily stock return of all stocks from Jan 2019 to Dec 2019 (before COVID) and Jan 2020 to Feb 2021 (COVID period). Further data divided into sectors as per Global Industry Classification Standard. We used Cross Sectional Absolute Deviation (CSAD) to check the herding contagion across the different industries of Chinese and Pakistani stock market. Our empirical results found weak association between market level herding and industry level herding. Our results authenticate that investors forms small clusters in stock market (Sectoral herding). Secondly, herding contagion not appear in any sample (both aggregate and industry level) between Chinese stock market and Pakistani stock market. Therefore, it concluded that Chinese market is segmented market and has no influence on herding activity taking place in Pakistani stock market. This study recommends that investor needs be more focus on sectoral level herding.


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References


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DOI: http://dx.doi.org/10.21015/vtess.v9i4.792

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