Testing of Herd Behavior In african Stock Markets During COVID-19 Pandemic

Abstract

In this paper, we aimed to examine the presence of mimetic behavior in African markets. To accomplish this, we utilized the model developed by Chang Cheng and Khorana (2000) and employed a non-linear regression specification using the "Cross-Sectional Absolute Deviation" (CSAD) method. Our objective was to detect the presence of mimetic behavior in the African financial market before and during the COVID-19 pandemic. The dataset for this study consisted of a set of companies listed on five African stock exchanges, namely Morocco, Nigeria, South Africa, West Africa, and Tunisia. The study period spanned from January 1, 2017, to May 31, 2022, resulting in a total of 1345 daily observations. We obtained the data from the official website of each respective exchange. Our findings indicate the presence of mimetic behavior in the studied markets, leading us to conclude that these markets are not informationally efficient.