INDUSTRY HERDING BEHAVIOR IN BULL AND BEAR MARKETS: EVIDENCE FROM MOROCCO

Abstract

This paper investigate sherding behavior on the Moroccan Stock Exchange using daily data of listed firms. We follow the methodology of (Chang et al., 2000) to test for the presence of herding behaviour in the context of market level and industry level during rising and falling market. At the market level, the empirical evidence indicates that herding is more pronounced in down market and no evidence of herding is reported during rising market. However, when testing industry herding behavior, we find that industry herding is more pronounced in down markets (11 of 24 industries) and only (3 of 24 industries) during up markets. Overall, the empirical results suggest that investors tend to herd more during bearish market due to the behavior of “flight to safety”.

Keywords

• herding behavior, moroccan stock exchange, csad, industry.