Individualism, Synchronized Stock Price Movements, and Stock Market Volatility
40 Pages Posted: 9 Nov 2012 Last revised: 4 Mar 2013
There are 2 versions of this paper
Individualism, Synchronized Stock Price Movements, and Stock Market Volatility
Date Written: January 12, 2013
Abstract
This paper examines the impact of national culture on herding behaviour across international financial markets. The relation between national culture and investor behaviour, and how it impacts overall market volatility is studied by examining synchronized stock price movements and stock market volatility in 47 countries around the world over the period of January 2003 to May 2012. I find that Nations with lower value of individualistic culture are more likely to have a higher number of synchronized stock price movements. Further, the correlations between stock price movements apparently increase stock market volatility. Nations with high individualistic culture have a lower number of synchronized stock price movements and thus have lower levels of stock market volatility. The positive relationship between synchronized stock price movements and stock market volatility is stronger for emerging markets during the financial crisis from June 2007 to December 2008. The results are statistically significant regardless of the empirical methods and control variables.
Keywords: Information and market efficiency, International financial markets, Financial economics, Herding, Behavioral finance, Market volatility
JEL Classification: G02, G14, G15, N20
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Creditor Rights and Corporate Risk-Taking
By Viral V. Acharya, Yakov Amihud, ...
-
Creditor Rights and Corporate Risk-Taking
By Viral V. Acharya, Yakov Amihud, ...
-
Creditor Rights and Corporate Risk-Taking
By Viral V. Acharya, Yakov Amihud, ...
-
Creditor Rights and Corporate Risk-Taking
By Viral V. Acharya, Yakov Amihud, ...
-
Creditor Rights and Corporate Risk-Taking
By Viral V. Acharya, Yakov Amihud, ...
-
Creditor Rights and Corporate Risk-Taking
By Viral V. Acharya, Yakov Amihud, ...
-
Access to Collateral and Corporate Debt Structure: Evidence from a Natural Experiment
By Vikrant Vig
-
Growing Out of Trouble? Corporate Responses to Liability Risk
By Todd A. Gormley and David A. Matsa
-
Bank Finance Versus Bond Finance
By Fiorella De Fiore and Harald Uhlig