Investor Herding and Spillovers in African Debt Markets
AbstractUsing high-frequency data for sovereign long-term bond yields and five-year credit default swap spreads, we estimate a regression model to identify a nonlinear link between cross-section deviation of market yield and extreme movements in African markets and other regions. Results indicate that African sovereign bonds have been subject to herding. International investors tend to lump African sovereign bonds into one asset class, pricing risk based on regional market performance instead of individual countries' performance. Moreover, we find evidence of herding spillovers from other regions. Africa is the most vulnerable of developing regions to shifts in market sentiment.
CitationMorsy, Hanan, Eman Moustafa, Tiguene Nabassaga, and Mustafa Yenice. 2021. "Investor Herding and Spillovers in African Debt Markets." AEA Papers and Proceedings, 111: 607-10. DOI: 10.1257/pandp.20211118
- G11 Portfolio Choice; Investment Decisions
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- G15 International Financial Markets