Abstract: This paper analyzes the presence of herding behavior in the European Futures Carbon Market. This is a blind market in which the vast majority of investors are institutional. Both features lead us to study the existence of herding under very restrictive conditions. An intraday trade database has been used in order to analyze this phenomenon at high frequencies. A pattern analysis shows that herding intensifies with the level of speculation and other behavioral biases like psychological prices or price clustering. The reaction of seller initiated trades to the arrival of market news also induces an increase in the degree of herding. Furthermore, we detect higher levels of herding with higher levels of uncertainty and with a larger number of trades. Finally, we show that herding destabilizes the market and leads traders to overreact to these circumstances.
Publication Year: 2016
Publication Date: 2016-01-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 1
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