Market herd mentality in the Philippine equity market

Date of Publication

8-2019

Document Type

Master's Thesis

Degree Name

Master of Science in Computational Finance

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management

Thesis Adviser

Edwin B. Valeroso

Defense Panel Chair

Jose Mari B. Lacson

Defense Panel Member

Tyrone Panzer L. Chan Pao
Janessa B. Tan

Abstract/Summary

In terms of size effects, this study determined the existence of market herd mentality towards a market performance for ten years. The period began from January 2009 until December 2018 in the Philippine Equity Market. Two (2) portfolios were constructed based on the market

capitalization of listed stocks in the Philippines. These are (i) large- capitalization portfolio and (ii) small-capitalization portfolio. Through a

state-space approach with a Kalman filter algorithm as modeled by Hwang and Salmon (2004) and by employing cross-sectional standard deviation of Capital Asset Pricing Model’s Beta (Market Model), the results showed that herding towards market performance is present in the large and small-capitalization portfolios. Added to this, the correlation analysis of the quantified latent herding parameters between the two (2) portfolios yielded a low and direct linear relationship. Recommendations have been provided to encourage future research which concerns the herding behavior in the Philippines. Ultimately, a thrilling characteristic of this research is the mathematical quantification of behavior that used stock prices as the primary source of information.

Abstract Format

html

Language

English

Format

Electronic

Accession Number

CDTG008195

Keywords

Stock exchanges--Philippines; Kalman filtering; Corporations—Finance

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Embargo Period

2-18-2025

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