Financial interpretation of herd behavior index and its statistical estimation

Woojoo Lee; Jae Youn Ahn

doi:10.1016/j.jkss.2014.09.005

Financial interpretation of herd behavior index and its statistical estimation

Woojoo Lee, Jae Youn Ahn

Department of Statistics

Research output: Contribution to journal › Article › peer-review

4 Scopus citations

Abstract

Herd behavior received increasing attention as the key to understanding financial crises. Recently, Dhaene et al. (2012) proposed the herd behavior index (HIX) to measure the degree of the comonotonic movement of stock prices. Choi et al. (2013) introduced the revised version of HIX (RHIX) and illustrated why RHIX should be preferred to HIX in comparing herd behaviors based on simple toy models, but failed to offer any sufficient justification. The present paper investigates three aspects of RHIX. First, RHIX is explained as a useful tool to compare herd behaviors from different groups. For this, a new alternative representation of RHIX is provided. Second, we investigate the statistical estimation of RHIX. In particular, the realized version of RHIX is calculated using tick-by-tick stock prices and the asymptotics of bootstrap equivalence are provided to estimate the confidence interval of RHIX. Third, to extend application scope of RHIX, RHIX is employed in a clustering analysis.

Original language	English
Pages (from-to)	295-311
Number of pages	17
Journal	Journal of the Korean Statistical Society
Volume	44
Issue number	2
DOIs	https://doi.org/10.1016/j.jkss.2014.09.005
State	Published - Jun 2015

Bibliographical note

Funding Information:
The authors would like to thank Changki Kim and Yang Ho Choi for discussions on the subject of this paper. They would also like to thank the referees for their helpful comments. Woojoo Lee’s work was supported by Basic Science Research Program through the National Research Foundation of Korea (NRF) funded by the Ministry of Education, Science and Technology ( NRF-2013R1A1A1061332 ). Jae Youn Ahn’s work was supported by the National Research Foundation of Korea (NRF) grant funded by the Korean government ( 2013R1A1A1076062 ).

Publisher Copyright:
© 2014 The Korean Statistical Society.

Keywords

Comonotonicity
Countermonotonicity
Herd behavior

Access to Document

10.1016/j.jkss.2014.09.005

Cite this

@article{50f66f77d69f4f1ba89981077748fc87,

title = "Financial interpretation of herd behavior index and its statistical estimation",

abstract = "Herd behavior received increasing attention as the key to understanding financial crises. Recently, Dhaene et al. (2012) proposed the herd behavior index (HIX) to measure the degree of the comonotonic movement of stock prices. Choi et al. (2013) introduced the revised version of HIX (RHIX) and illustrated why RHIX should be preferred to HIX in comparing herd behaviors based on simple toy models, but failed to offer any sufficient justification. The present paper investigates three aspects of RHIX. First, RHIX is explained as a useful tool to compare herd behaviors from different groups. For this, a new alternative representation of RHIX is provided. Second, we investigate the statistical estimation of RHIX. In particular, the realized version of RHIX is calculated using tick-by-tick stock prices and the asymptotics of bootstrap equivalence are provided to estimate the confidence interval of RHIX. Third, to extend application scope of RHIX, RHIX is employed in a clustering analysis.",

keywords = "Comonotonicity, Countermonotonicity, Herd behavior",

author = "Woojoo Lee and Ahn, {Jae Youn}",

note = "Funding Information: The authors would like to thank Changki Kim and Yang Ho Choi for discussions on the subject of this paper. They would also like to thank the referees for their helpful comments. Woojoo Lee{\textquoteright}s work was supported by Basic Science Research Program through the National Research Foundation of Korea (NRF) funded by the Ministry of Education, Science and Technology ( NRF-2013R1A1A1061332 ). Jae Youn Ahn{\textquoteright}s work was supported by the National Research Foundation of Korea (NRF) grant funded by the Korean government ( 2013R1A1A1076062 ). Publisher Copyright: {\textcopyright} 2014 The Korean Statistical Society.",

year = "2015",

month = jun,

doi = "10.1016/j.jkss.2014.09.005",

language = "English",

volume = "44",

pages = "295--311",

journal = "Journal of the Korean Statistical Society",

issn = "1226-3192",

publisher = "Korean Statistical Society",

number = "2",

}

TY - JOUR

T1 - Financial interpretation of herd behavior index and its statistical estimation

AU - Lee, Woojoo

AU - Ahn, Jae Youn

N1 - Funding Information: The authors would like to thank Changki Kim and Yang Ho Choi for discussions on the subject of this paper. They would also like to thank the referees for their helpful comments. Woojoo Lee’s work was supported by Basic Science Research Program through the National Research Foundation of Korea (NRF) funded by the Ministry of Education, Science and Technology ( NRF-2013R1A1A1061332 ). Jae Youn Ahn’s work was supported by the National Research Foundation of Korea (NRF) grant funded by the Korean government ( 2013R1A1A1076062 ). Publisher Copyright: © 2014 The Korean Statistical Society.

PY - 2015/6

Y1 - 2015/6

N2 - Herd behavior received increasing attention as the key to understanding financial crises. Recently, Dhaene et al. (2012) proposed the herd behavior index (HIX) to measure the degree of the comonotonic movement of stock prices. Choi et al. (2013) introduced the revised version of HIX (RHIX) and illustrated why RHIX should be preferred to HIX in comparing herd behaviors based on simple toy models, but failed to offer any sufficient justification. The present paper investigates three aspects of RHIX. First, RHIX is explained as a useful tool to compare herd behaviors from different groups. For this, a new alternative representation of RHIX is provided. Second, we investigate the statistical estimation of RHIX. In particular, the realized version of RHIX is calculated using tick-by-tick stock prices and the asymptotics of bootstrap equivalence are provided to estimate the confidence interval of RHIX. Third, to extend application scope of RHIX, RHIX is employed in a clustering analysis.

AB - Herd behavior received increasing attention as the key to understanding financial crises. Recently, Dhaene et al. (2012) proposed the herd behavior index (HIX) to measure the degree of the comonotonic movement of stock prices. Choi et al. (2013) introduced the revised version of HIX (RHIX) and illustrated why RHIX should be preferred to HIX in comparing herd behaviors based on simple toy models, but failed to offer any sufficient justification. The present paper investigates three aspects of RHIX. First, RHIX is explained as a useful tool to compare herd behaviors from different groups. For this, a new alternative representation of RHIX is provided. Second, we investigate the statistical estimation of RHIX. In particular, the realized version of RHIX is calculated using tick-by-tick stock prices and the asymptotics of bootstrap equivalence are provided to estimate the confidence interval of RHIX. Third, to extend application scope of RHIX, RHIX is employed in a clustering analysis.

KW - Comonotonicity

KW - Countermonotonicity

KW - Herd behavior

UR - http://www.scopus.com/inward/record.url?scp=84947492054&partnerID=8YFLogxK

U2 - 10.1016/j.jkss.2014.09.005

DO - 10.1016/j.jkss.2014.09.005

M3 - Article

AN - SCOPUS:84947492054

SN - 1226-3192

VL - 44

SP - 295

EP - 311

JO - Journal of the Korean Statistical Society

JF - Journal of the Korean Statistical Society

IS - 2

ER -

Financial interpretation of herd behavior index and its statistical estimation

Abstract

Bibliographical note

Keywords

Access to Document

Fingerprint

Cite this