International Journal of Performance Measurement












Volume 7, Number 2, December 2017

Discussion of Herding Effect on Average Moving Crossover

Yeong-Long Li¹*


This study utilized the data from the publicly disclosed unit price and volume data for buy and sells orders at the daily closing and converted that data into investor positive degree for order-placement behavior. The acquisition and calculation of this data is transparent, to avoid the uncertainty of analog data.
This study's contributions then derives from using this data to calculate if investor order-placement behavior produces a herding effect when the information reaches investors that the MA (MA) has created an increasing crossover for individual stocks over short- and long-term periods.
Stock samples were taken from the Taiwan 50 (TW50) Index from the period of January 1, 2010 to December 31, 2013. The data is uninterrupted during that time period for 36 stocks, and is divided into the three major categories of the manufacturing, electronics, and financial industries. Statistics for the various stocks were calculated as an average of the changing positive degree situation among investors 3 days before and after receiving information about short- and long-term MA crossover increases.
When a positive degree change of the chi-square test before and after (the information release) exceeded 59.80%, the herding effect became undeniable. The empirical results for the positive changes in purchasing show that when the MA portfolio of the 5th day crossed over the 20th day, manufacturers had no choice but to add to the purchasing herding effect. In terms of selling positive degree, when the MA portfolio of electronics stocks on the 20th day crossed over the 60th day, they had no choice to but sell high, causing the passive herding effect. Therefore, in the Taiwan Stock Exchange (TWSE) different industry's investors have specific short- and long-term MA portfolios. As such, upon receiving information of the industry crossover increase, companies were unable to resist the herding effect.


Keywords:The Herding Effect, Moving Average, Positive Degree

JEL Classification: Q11, G17, G40


¹ Department of Banking and Finance, Tamkang University