A new measure of herding and empirical evidence for the US, UK, and South Korean

Abstract

This study proposes a new measure of herding which is based on the cross-sectional dispersion of the factor sensitivity of assets within a market. With the new mea-sure we can evaluate the directions towards which the market may be herding and separate these from movements in fundamentals. We apply the new measure to an analysis of the US, UK, and South Korean stock markets and ... nd evidence of "herding towards the market portfolio" during relatively quiet periods rather than when the market is under stress. The approach also allows us to investigate herding towards other factors beyond the market factor and we .. . nd that the US market shows signi ... cant herding towards "value" after the Russian Crisis in 1998.