Abstract
This paper explores the relationship between stock and commodity markets from a novel perspective by examining the relationship between speculation in the oil market and investor herding in stock markets. Using firm level data from three energy importing and exporting nations, namely Russia, Brazil, and Turkey, we show that these markets often switch between herding and anti-herding states, while herding is more prevalent in the case of Russia. We also find that speculative activities in the global oil market significantly affect investors behavior in Russia and Brazil with greater oil speculation associated with herding in these markets. Our findings suggest that policy makers should watch measures of speculative activities in the commodity markets for possible signals in order to model and monitor investor behavior in their local markets.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
The World Bank Open Data. http://data.worldbank.org.
Demirer et al. (2010) provide a review of the different testing methodologies based on return dispersion.
References
Apergis N (2014) Can gold prices forecast the Australian dollar movements? Int Rev Econ Financ 29:75–82
Apergis N, Miller SM (2009) Do structural oil - market shocks affect stock prices? Energy Econ 31(4):569–575
Arouri MEH, Rault C (2012) Oil prices and stock markets in GCC countries: empirical evidence from panel analysis. Int J Financ Econ 17(3):242–253
Babalos V, Economou F, Kostakis A, Philippas N (2013) Herding behaviour in REITs: novel tests and the role of financial crisis. Int Rev Financ Anal 29:166–174
Bai J, Perron P (2003) Computation and analysis of multiple structural change models. J Appl Econ 18(1):1–22
Balcilar M, Demirer R (2015) Impact of global shocks and volatility on herd behavior in an emerging market: evidence from Borsa Istanbul. Emerging Mark Financ Trade 51:1–20
Balcilar M, Demirer R, Hammoudeh S (2013) Investor herds and regime-switching: evidence from gulf Arab stock markets. J Int Financ Mark Inst Money 23:295–321
Balcilar M, Demirer R, Hammoudeh S (2014) What drives herding in developing stock markets? Relative roles of own volatility and global factors. North Am J Econ Financ 29:418–440
Balcilar M, Demirer R, Ulussever T (2016) Does speculation in the oil market drive investor herding in net exporting nations? Available at SSRN: https://ssrn.com/abstract=2756997 or http://dx.doi.org/10.2139/ssrn.2756997
Balcilar M, Demirer R, Ulussever T (2017) Does speculation in the oil market drive investor herding in emerging stock markets? Energy Econ 65:50–63
Banerjee A (1992) A simple model of herd behavior. Q J Econ 107:797–818
Basher SA, Sadorsky P (2006) Oil price risk and emerging stock markets. Global Finance Journal 17(2):224–251
Bernanke B (2016) The relationship between stocks and oil prices. Brookings. https://www.brookings.edu/blog/ben-bernanke/2016/02/19/the-relationship-between-stocks-and-oil-prices/
Bikhchandani S, Sharma S (2000) Herd behavior in financial markets. IMF Staff Pap 47:279–310
Blasco N, Corredor P, Ferreruela S (2012) Does herding affect volatility? Implications for the Spanish stock market. Quan Finan 12(2):311–327
Cakan E, Balagyozyan A (2014) Herd behavior in the Turkish banking sector. Appl Econ Lett 21(2):75–79
Chan LH, Nguyen CM, Chan KC (2015) A new approach to measure speculation in the oil futures market and some policy implications. Energy Policy 86:133–141
Chang EC, Cheng JW, Khorana A (2000) An examination of herd behavior in equity markets: an international perspective. J Bank Financ 24(10):1651–1699
Chiang TC, Zheng D (2010) An empirical analysis of herd behavior in global stock markets. J Bank Financ 34(8):1911–1921
Christie, WG and Huang, RD 1995. Following the pied piper: do individual returns herd around the market? Financ Anal J, July–-August 1995, 31–37
Demirer R, Kutan A (2006) Does herding behavior exist in Chinese stock market? J Int Financ Mark Inst Money 16:123–142
Demirer R, Kutan A, Chen C (2010) Do Investors herd in emerging stock markets? Evidence from the Taiwanese market. J Econ Behav Organ 76:283–295
Demirer R, Lien D, Zhang H (2015) Industry herding and momentum strategies. Pac Basin Financ J 32:95–110
Devenow A, Welch I (1996) Rational herding in financial economics. Eur Econ Rev 40:603–615
Economou F, Kostakis A, Philippas N (2011) Cross-country effects in herding behaviour: evidence from four south European markets. J Int Financ Mark Inst Money 21:443–460
Froot K, Scharfstein D, Stein J (1992) Herd on the street: informational inefficiencies in a market with short-term speculation. J Financ 47:1461–1484
Issac MJ, Ratti RA (2009) Crude oil and stock markets: stability, instability, and bubbles. Energy Econ 31:559–568
Jones DW, Lelby PN, Paik IK (2004) Oil price shocks and the macroeconomy: what has been learned since 1996? Energy J 25:1–32
Kilian L (2008) The economic effects of energy price shocks. J Econ Lit 46:871–1009
Kilian L, Park C (2009) The impact of oil prices shocks and the U.S. stock market. Int Econ Rev 50:1267–1287
Philippas N, Economou F, Babalos V, Kostakis A (2013) Herding behavior in REITs: novel tests and the role of financial crisis. Int Rev Financ Anal 29:166–174
Sukcharoen K, Zohrabyan T, Leatham D et al (2014) Interdependence of oil prices and stock market indices: a copula approach. Energy Econ 44(C:331–339
Tan L, Chiang TC, Mason JR, Nelling E (2008) Herding behavior in Chinese stock markets: an examination of a and B shares. Pac Basin Financ J 16:61–77
Yao J, Ma C, He WP (2014) Investor herding behaviour of Chinese stock market. Int Rev Econ Financ 29:12–29
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Cakan, E., Demirer, R., Gupta, R. et al. Oil speculation and herding behavior in emerging stock markets. J Econ Finan 43, 44–56 (2019). https://doi.org/10.1007/s12197-018-9427-0
Published:
Issue Date:
DOI: https://doi.org/10.1007/s12197-018-9427-0