Sherrihan Radi , Bartosz Gebka , Vasileios Kallinterakis
{"title":"The wisdom of the madness of crowds: Investor herding, anti-herding, and stock-bond return correlation","authors":"Sherrihan Radi , Bartosz Gebka , Vasileios Kallinterakis","doi":"10.1016/j.jebo.2024.07.005","DOIUrl":null,"url":null,"abstract":"<div><p>We examine investors’ herding/anti-herding behavior in the US stock and corporate bond markets and their impact on stock-bond return correlation. Corporate bonds exhibit herding, with stocks displaying anti-herding. Bond herding and stock anti-herding are weakly related, with each significantly dampening the stock-bond return correlation. This effect is largely driven by their irrational components, affecting mostly the correlation of noise-driven stock and bond return elements, more so during periods of elevated uncertainty, optimistic sentiment and excessively positive economic performance. As the irrational forces in each asset class (stocks; bonds) countervail each other, this implies greater stability and resilience for the financial system.</p></div>","PeriodicalId":48409,"journal":{"name":"Journal of Economic Behavior & Organization","volume":null,"pages":null},"PeriodicalIF":2.3000,"publicationDate":"2024-07-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Economic Behavior & Organization","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0167268124002658","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
We examine investors’ herding/anti-herding behavior in the US stock and corporate bond markets and their impact on stock-bond return correlation. Corporate bonds exhibit herding, with stocks displaying anti-herding. Bond herding and stock anti-herding are weakly related, with each significantly dampening the stock-bond return correlation. This effect is largely driven by their irrational components, affecting mostly the correlation of noise-driven stock and bond return elements, more so during periods of elevated uncertainty, optimistic sentiment and excessively positive economic performance. As the irrational forces in each asset class (stocks; bonds) countervail each other, this implies greater stability and resilience for the financial system.
期刊介绍:
The Journal of Economic Behavior and Organization is devoted to theoretical and empirical research concerning economic decision, organization and behavior and to economic change in all its aspects. Its specific purposes are to foster an improved understanding of how human cognitive, computational and informational characteristics influence the working of economic organizations and market economies and how an economy structural features lead to various types of micro and macro behavior, to changing patterns of development and to institutional evolution. Research with these purposes that explore the interrelations of economics with other disciplines such as biology, psychology, law, anthropology, sociology and mathematics is particularly welcome.