Test of herding behaviour in the Johannesburg stock exchange : application of quantile regression model

Abstract: The current study searches for evidence of herding behaviour in South Africa’s financial industry using an alternative approach. As a departure from the conventional test methodologies, the current study adopts the quantile regression model in estimating the empirical data on daily stock returns from January 2010 to September 2015. Employing the median as an alternative measure of average market portfolio returns, the study finds evidence of herding behaviour in the banking and real estate sectors during the sample period. Herding behaviour shows asymmetry and investors in the banking sector exhibit the herding behaviour when the market is falling (bear phase), whereas in the real estate sector, investors exhibited the herding behaviour when the market is rising (bull phase). However, in the entire financial industry, the empirical results show evidence of herding behaviour only during the extreme market period (bull phase)