Abstract
Abstract The study aims to investigate the existence of herd behavior of foreign investors in an emerging market, namely Borsa Istanbul (BIST), during the financial crisis at Borsa Istanbul. First, the financial crisis periods for Borsa Istanbul are determined based on CMAX methodology. Then, to detect existence of herd behavior during these financial crisis periods, the state space model is employed. Lakonishok, Shleifer, and Vishny methodology is used to test whether herding activity of foreign investors affect stock market in Borsa Istanbul during the pre-, during, and postcrisis periods. The findings provide support for herding in the overall market. However, the herding by foreign investors goes down during the crisis period due to lower trading value of these investors in the market. Herding by foreign investors affects small companies and lower return stocks more.
Published Version
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