Naslov
AN EMPIRICAL ANALYSIS OF HERD BEHAVIOUR IN THE CROATIAN STOCK MARKET

Autori
Tićac, Nikolina ; Dolinar, Denis ; Lovretin Golubić, Zrinka ; Pecina, Ena

Vrsta, podvrsta i kategorija rada
Sažeci sa skupova, prošireni sažetak, znanstveni

Izvornik
Abstracts of FEB Zagreb 14th International Odyssey Conference on Economics and Business / Ferjanić Hodak, Danijela ; Pavić, Ivana ; Halar, Petra - Zagreb : Ekonomski fakultet Sveučilišta u Zagrebu, 2023, 40-41

ISBN
978-953-346-202-8

Skup
FEB Zagreb 14th International Odyssey Conference on Economics and Business

Mjesto i datum
Poreč, Hrvatska, 10.05.2023. - 13.05.2023

Vrsta sudjelovanja
Predavanje

Vrsta recenzije
Međunarodna recenzija

Ključne riječi
behavioural finance, herd behaviour, Croatian stock market

Sažetak
Traditional finance theory assumes that all investors are rational in their behaviour. According to the Efficient market hypothesis – EFM, one of the most respected concepts of traditional finance theory, market prices reflect all available information and any new information is instantaneously integrated into these prices making securities fairly priced at any time. In other words, in the process of security evaluation and investment decision-making, rational investors are using a full set of relevant information available in order to maximize their utility. Consequently, any non-rational behaviour, according to the EFM, is considered only a temporary phenomenon which will immediately be exploited by rational investors who will perform arbitrage on the market. As opposed to the rational investor, assumed by the traditional finance theory, in recent decades behavioural finance is becoming more important by emphasizing that rationality is not the exclusive driver of human behaviour. Thus, behavioural economists claim that investors’ decision-making is driven by their emotions such as fear or greed, cognitive abilities, but also social and other external factors, consequently leading to non-rational or normal behaviour. Namely, the behavioural approach assumes that individual decision-makers are subject to different types of bias such as overconfidence, framing, mental accounting, anchoring and herd behaviour. Herd behaviour, among many different definitions, can be described as a behaviour pattern in which everyone works what others do, even though their information and knowledge tell them otherwise. If the herd behaviour effect truly exists, it could cause deterioration of the market efficiency and lead to deviation of the securities’ price from their true intrinsic values. According to the results of different studies, herd behaviour is more expected in conditions of downward market trends, especially during financial crises. This research aims to test the existence of herd behaviour in the Croatian stock market in the period from 2003 to 2013. The research was conducted on a sample of 29 stocks from the Zagreb Stock Exchange (ZSE). More precisely, all observed stocks were constituents of the CROBEX index at a certain point during the observed period. We used weekly data on the CROBEX index and stocks’ returns. The overall observation period was divided into two sub-periods: 2003 – 2006 and 2007 – 2013, in order to capture the effects of the Croatian stock market boom and the global financial crisis respectively. To test the effect of herd behaviour, we used a security return dispersion model. The results obtained using regression analysis, namely Cross-Sectional Absolute Deviation (CSAD) model and the Cross-Sectional Standard Deviation (CSSD) model, did not confirm the existence of herd behaviour for the observed period in the Croatian stock market. However, for the sub-period of 2007 – 2013, there was an indication of herd behaviour ; namely, we obtained the expected negative but statistically insignificant coefficient. The obtained results in this study corroborate the results of similar studies in which the herd behaviour effect was not confirmed. As some studies claim that the effect of herd behaviour is easier to detect in daily data than in weekly or monthly data, we can consider our weekly observations as a limitation for our study. Also, when taking further research, one should consider other asset classes, if possible, because it is familiar that the Croatian financial market is less developed and individual investors are often more focused on real-estates or other alternative asset classes.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA