Abstract
Frontier markets, particularly the Moroccan financial market, are characterized by a narrowness of market, inability to absorb erratic price fluctuations and the low liquidity of securities that encourage investors to herd and imitate those who have all the information about the market. A quantitative research approach was used to analyze the existence of herding n Moroccan stock market. The daily data used in this study concerns the period from 04/01/2010 to 29/12/2017 and contains the daily returns of the MASI and a total of 43 traded stocks. Statistical and econometric methods such as multidimensional scaling and Cross-sectional absolute deviation were used. Subsequently, after the regression models were examined, findings indicated that the first stocks with the highest similarity to the index return are BMCE, BCP, IAM, ATW and CMSR, and the first stocks with the highest dissimilarity are PAP, IBC and SNP, This will have to allow investors to choose profitable alternatives and avoid those that present a possible risk. The results did also show the existence of herding in the Moroccan stock market both upward and downward. This finding was supported by the clear existence of a non-linearity between market performance and CSAD measurement, which confirms the prediction of a non-linear inversion relationship between CSAD and ð‘…ð‘š. This could be due to the low level of transparency that prevails in frontier stock exchanges and reduces the quality of their information environment, which leads investors not to react rationally and to draw information from the transactions of their peers.
Highlights
In a few years, the efficient market hypothesis (EMH) has become the keystone of the entire financial theory
The results obtained are in line with those of other literature studies, in particular the Economou study (2016), which found a clear existence of herd behavior in Nigeria and Morocco in 2005
The objective of the study was to determine the existence of herding behavior in the Moroccan financial market
Summary
The efficient market hypothesis (EMH) has become the keystone of the entire financial theory. The first point states that the market price is the price that reflects the intrinsic value of the assets, in other words, the "fundamentals". The second point indicates that prices include all available market information and that there is no arbitrage opportunity. The Darwinian idea states that in financial markets, only rational investors should remain (Broihanne & Capelle-Blancard, 2018). Given the importance of this behavior and its implications for financial markets, the literature has developed rapidly in recent years, partly because of the prolonged crisis in US financial markets, which subsequently spread to global markets
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