Herding Behavior in the UAE Equity Markets: Evidence From a Regime-Switching Model

Abstract

This paper is investigated herding and cross-herding behavior in the UAE equity markets during the period from January 1, 2008 to March 31, 2019. Herding behavior is tested in both static and regime-switching framework. The findings of the paper suggest a presence of significant herd behavior in the UAE markets. Herding asymmetries are detected with respect to market returns and volatility where herding appears more pronounced during market declines and high volatility regime. Additionally, the results suggest a significant herding effect during the global financial crisis. The findings also show strong cross-market herding during the period of market stress. Results from this study could be useful gaining an insight into the functioning of the UAE stock markets for academicians in behavioral finance also as for policymakers.