An Examination of Herd Behavior in the Jordanian Equity Market

Mohammad Al-Shboul


The paper aims at examining the herd behavior in the Jordanian equity market before and after the 2008 global financial crisis. The most common approaches [Christie and Huang (1995) (CH) and Chang et al. (2000) (CCK)] are used to test for herding tendency of the financial and nonfinancial firms. By making use of the CH approach, estimated using the Ordinary Least Squares method (OLS), evidence of the absence of herding tendency is reported in extreme and normal market conditions. To investigate the tendency for herding further, the CCK approach is also implemented. The model of CCK is estimated using the OLS and the Quantile Regression (QR) methods. The results of CCK, using OLS, show evidence of the absence of linear herding for both types of firms before and after the crisis. But, only nonfinancial firms exhibit evidence of nonlinear herding in both sub-periods. In the extreme up and down market, evidence of linear herding is only found after the crisis for both types of firms when market is trending up. For all firms at the median level, the results of QR provide evidence of linear herding after the crisis while no evidence is reported for nonlinear herding. Financial firms exhibit only nonlinear herding at median level before the crisis when the market is trending up. Nonfinancial firms do not exhibit linear and nonlinear herding at the median level in both up and down markets. The results of OLS and QR are different for both types of firms. However, for linear herding the results of CH and CCK are similar. Jordanian investors exhibit a tendency for linear herding in extreme and normal market conditions but cannot have enough power to convert into nonlinrear one.

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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)  Email:

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