Herding, trend chasing and market volatility

Market Stress and Herding

Market Stress and Herding* We propose a new approach to detecting and measuring herding which is based on the cross-sectional dispersion of the factor sensitivity of assets within a given market. This method enables us to evaluate if there is herding towards particular sectors or styles in the market including the market index itself and critically we can also separate such herding from common ...

Exchange rate volatility and its effect on stock market volatility

This paper investigates empirically the effect of volatility of the exchange rate of the U.S. dollar vis-à-vis the euro on U.S. stock market volatility while controlling for a number of drivers of stock return volatility. Using a GARCH(1, 1) model and using weekly data covering the period from the week of January 1, 1999 through the week of January 25, 2010, it is found that the 9/11 terrorist ...

Idiosyncratic Volatility, Fundamentals, and Institutional Herding: Evidence from the Japanese Stock Market

We offer evidence that variations in firm idiosyncratic volatility are related to both behavior and fundamental factors. Using Japanese data from 1975 to 1999, we document that both institutional herding and the absolute value of firm earnings are positively related to idiosyncratic volatility. We find that institutional herding explains about 10% of the cross-sectional variation in idiosyncrat...

Herding, Information Cascades and Volatility Spillovers in Futures Markets

Trend Inflation and the Unemployment Volatility Puzzle

I show that the combination of small positive trend inflation with staggered prices may account for the large relative volatilities found in US labor market data. The model does not have any wage rigidity and is hit only by an aggregate technology shock. The calibration procedure uses standard parameter values. Controlling for the sample average of the CPI inflation rate and the degree of price...