Investor Herding Behavior and Stock Volatility

초록

This study explores the herding behavior of different types of investors (individual investors and both domestic and foreign institutional investors) and its impact on the volatility of individual stock returns. Intraday volatility and daily herding intensity of each investor type are measured using high-frequency transaction data containing detailed information on all executed orders in the Korea Exchange. This study regresses realized volatility on the herding intensity of each investor type and other control variables and finds that herding of domestic and foreign institutions decreases realized volatility, whereas herding of individual investors increases it. This study also finds that the destabilizing effect of individual investors’ herding behavior is exacerbated on days of high market uncertainty, and the stabilizing effect of domestic institutions’ herding is weakened on those days, whereas the stabilizing effect of foreign institutions’ herding is not affected by the level of market uncertainty.

키워드