Herding behavior in stock markets of oil-importing and oil-exporting countries: the role of oil price

This study investigates the asymmetric effect of oil price on herding behavior in three oil-exporting (Saudi Arabia, Canada, and Russia) and three oil-importing countries (USA, Japan, and China) stock markets. Due to the negative relationship between oil-exporting and oil-importing stock markets, the effect of oil price on herding behavior in those stock markets may differ. Based on the static approach, results reveal no evidence of herding in all stock markets, particularly investors in oil-importing stock markets trade away from the market consensus. Our findings support a dynamic herding pattern by conducting a time-varying parameter model, which seems to be more prevalent in the Chinese stock market. While we do not detect a significant impact of oil price on the level of herding in all stock markets, the rise in oil price boosts investors to herd in Russia, Japan, and China.