Behavioural finance og finansielle kriser: Analyse af flokadfærd og momentum på NASDAQ markedet

Daniel Sørensen

Student thesis: Master thesis


The theoretical base is behavioural finance and related topics to the study of herding and momentum set in a period with financial crisis. Behavioural finance is discussed in order to get an understanding of herd behaviour and momentum, and also to explain the results from the empirical analysis. The possible existence of these irrational anomalies is theoretically argued for by the limits and risks to arbitrage. The set of data is the NASDAQ market and constituent shares in the period from the beginning of 1990 to the end of 2008 The empirical analysis of herd behaviour is based on two test methodologies formulated by Chang et al. (1999) and Hwang and Salmon (2009) hereafter referred to as CCK and HS respectively. CCK doesn't show a general presence of herd behaviour. The CCK analysis shows an asymmetrical result between rising and falling markets where rising markets exhibit an exponentially rising spread from the average as the market return rises, whereas falling markets show a linear and rational relationship between share return spread from the average and the market return. The CCK results are not completely in accordance with the results from the HS analysis, which shows that herd behaviour is limited to specific periods dependent on the state of the market. This implies that herd behaviour is declining in times of financial crisis from a level of existent herd behaviour before the crisis. The time before the NASDAQ crash was characterized by a modest level of herd behaviour which declined sharply after the crash, stayed buoyant for a period until the beginning of 2005 and hereafter an increasing level of herd behaviour which reversed mid 2008. The empirical analysis of momentum is based on De Bondt and Thaler (1985) and also Jegadeesh and Titman (1993). The two test methodologies confirm the results mutually. Market wide momentum isn't present for the research period as a whole except for a limited period where the short term momentum before the NASDAQ crash was most evident. In addition to this the analysis shows a modest momentum effect covering periods from 1995 up to 2000 and from 2005 up to 2009. The remaining periods show a distinct anti-momentum effect. The momentum analysis is not completely consistent with the explanations within behavioural finance as the shortest term shows a clear dominance of 'loser' stocks.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2010
Number of pages106