Asymmetric and cross-asset herding: Evidence from bond and equity markets

29 Pages Posted: 4 May 2020 Last revised: 5 May 2021

See all articles by Sherrihan Radi

Sherrihan Radi

University of Kent, Kent Business School

Antonis Alexandridis

University of Kent; University of Macedonia - Department of Accounting and Finance

Vasileios Pappas

University of Surrey - Surrey Business School

Date Written: May 5, 2021

Abstract

We examine herding in US corporate bond and equity markets between 2008-2018. Conditioning on market liquidity and volatility, we find significant asymmetric herding behavior in both markets and all credit rating portfolios. More specifically, we document a positive relationship between herding and market liquidity, with the level of volatility intensifying the observed herding effects. Herding is more pronounced in corporate bonds in comparison to equities. Further, we find cross-asset herding spillovers from the corporate bonds to their respective equities. The direction of the cross-herding effect holds during the 2008 global financial crisis, but switches post-crisis from equity to corporate bonds.

Keywords: Cross-sectional dispersion; cross-herding; liquidity; volatility; corporate bonds

JEL Classification: G4; G12; G10

Suggested Citation

Radi, Sherrihan and Alexandridis, Antonis and Pappas, Vasileios, Asymmetric and cross-asset herding: Evidence from bond and equity markets (May 5, 2021). Available at SSRN: https://ssrn.com/abstract=3570518 or http://dx.doi.org/10.2139/ssrn.3570518

Sherrihan Radi (Contact Author)

University of Kent, Kent Business School ( email )

Canterbury, Kent CT2 7PE
United Kingdom

Antonis Alexandridis

University of Kent ( email )

Kent Business School
CT2 7NP
United Kingdom

University of Macedonia - Department of Accounting and Finance ( email )

156 Egnatia Str.
Thessaloniki, 54006
Greece

Vasileios Pappas

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 8DN
United Kingdom

HOME PAGE: http://https://www.surrey.ac.uk/people/vasileios-pappas

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