Regulatory Impact Assessment Adoption Determinants: A Diagnostic Framework
Exploring Responses to the Employment Impact of Excise Tax Reform: The Case of the Philippine Tobacco Industry
Mapping Out Employment Opportunities in the Cultural Heritage Sector A Strategic Framework
Enhancing Decent Work Outcomes in Small-Scale Gold Mining

PIDS WB 2021-0904
Annual Public Policy Conference Webinar 3: Green And Inclusive Recovery
PIDS WB 2021-0903
Annual Public Policy Conference Webinar 2: Ethical Business
PIDS WB 2021-0902
Opening Program and Annual Public Policy Conference Webinar 1: Resetting Capitalism
PIDS WB 2021-0901
19th Development Policy Research Month Kick-Off Forum
Publication Detail
BSP WPS 2021-02: Market Herding and Market Stress in the EMEAP Economies

Ascertaining the extent of market herding and market stress has gained particular importance for regulators, especially central banks. On the one hand, analyzing market herding is important as price trends tend to raise questions on whether sustained increases in asset prices reflect true improvements in the profitability of business or is just a consequence of market herding. On the other hand, uptrend in prices, which are driven by market herding is unsustainable and poses risks of asset price bubbles. Likewise, efforts to identify the build-up of stress in the financial system have been at the forefront of policymakers’ agenda, underscoring the large losses incurred by economic agents and the economy, at large, in the past crises. For this study, econometric methods were used in identifying alarming trends in market herding and critical levels of market stress in the EMEAP region. In estimating the degree of market herding, this study used the Hwang and Salmon (2004) model, which basically measures the relative dispersion of the betas for all the assets in the markets, taking into account the equilibrium conditions in the Capital Asset Pricing Model. In estimating market stress, this study adopts a Principal Component Analysis in estimating an overall index to capture financial market conditions. Results of the Hwang and Salmon (2004) model shows that investors’ herding behavior in the 11 EMEAP member economies generally correspond to the prevailing levels of market stress in their respective economies, resonating well with economic theory: market herding is high (low) when market stress is low (high).

Bangko Sentral ng Pilipinas
Authors Keywords
Bondoc, Bernadette Marie, M.; Martin, Christofer, A. ; macroeconomy; financial markets; capital asset pricing model; principal components analysis; government policy and regulation;
Download PDF Number of Downloads
Published in 2021 and available for Downloaded 2 times since July 08, 2021
Please let us know your reason for downloading this publication. May we also ask you to provide additional information that will help us serve you better? Rest assured that your answers will not be shared with any outside parties. It will take you only two minutes to complete the survey. Thank you.

To use as reference:
If others, (Please specify):
Name: (optional)
Email: (required, but will not display)
If Prefer to self-describe, please specify:
Level of Education:
If employed either part-time or full-time, name of office:
If others, (Please specify):
Would you like to receive the SERP-P UPDATES e-newsletter? Yes No
Use the space below if you have any comment about this publication or SERP-P knowledge resources in general.