Sectoral Herding: Evidence from an Emerging Market

Abstract

This study examines herding behavior in all industrial sectors of the Turkish stock market. Applying the methodology of Chang et al. (2000) to the Turkish sectoral daily stock prices from 2002 to 2014, we found strong evidence of herding. This evidence did not disappear even after we controlled for market regimes and firm fundamentals. Investor herding is asymmetric in all sectors; even though herding is prevalent in both rising and falling markets, it is more pronounced in rising markets. In the financial, services, and technology sectors herding is detected only in the highly volatile markets. In contrast, in low-volatility markets we confirm herding only in the services sector.