Do Global Disruptive Events Induce Herding Behaviour During Upward and Downward Market Movements? Evidence from Nordic and Baltic Stock Markets
Do Global Disruptive Events Induce Herding Behaviour During Upward and Downward Market Movements? Evidence from Nordic and Baltic Stock Markets

Summary/Abstract: This study investigates financial market reactions to the COVID-19 pandemic, focusing on investor herding behavior during uncertainty. Unlike previous research primarily on Asian and American markets, this study examines Northern European reactions, particularly in rising and falling markets. Using Nasdaq Nordic and Baltic daily stock data and the cross-sectional absolute deviation method, the results reveal herding on three of four Nasdaq Nordic stock markets (Sweden, Denmark, and Finland) and one of three Nasdaq Baltic markets (Lithuania). This behavior persisted throughout the COVID-19 period and during market downturns, with no herding observed during upward movements. The study highlights distinct investor responses to the same global disruption and suggests more pronounced herding in developed markets. Implications for Central European investors and policymakers are discussed, emphasizing the importance of awareness of herding, especially during downturns, and the need for measures promoting market rationality.

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