Herding behaviour dynamics in the Namibian securities exchange
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Date
2025
Authors
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Journal ISSN
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Publisher
University of Namibia
Abstract
The main purpose of this research was to analyse herding behaviour dynamics in the
Namibian Securities Exchange (NSX) for the period 1
st January 2003 to 30th June 2023
using weekly and monthly data series. The time-varying transition probability Markov
two-Regime Switching model (MRSM) was used to estimate the equations which is able
to capture time-varying phenomenon of herding behaviour. This study employed the
cross-sectional absolute standard deviation (CSAD) proposed by Chang, Cheng and
Khorana (2000) as the proxy for herding behaviour. The first paper examined the
existence of herding behaviour in the NSX as a whole. The static results revealed absence
of herding behaviour for the period under review. However, herding behaviour was
detected in high volatile regimes after utilising the MRSM which is in line with theory
and other previous studies. Thus, management of firms listed on the NSX should improve
the flow of information and transparency in terms of disclosure of published financial
statements inorder to induce investors’ confidence and reduce herding behaviour.
The second paper examined the existence of sectoral herding behaviour in the NSX. The
results of the MRSM revealed evidence of herding behaviour for the Industrial and
Resource sectors, especially during high volatility regimes. In this regard, it is better to
come up with a larger investment portfolio in order to reach the same diversification goal
in more volatile state. The third paper examines the influence of variations in South
African interest rates and exchange rates on herding behaviour in the NSX. The MRSM
produces mixed results regarding the influence of interest rates and exchange rate
variations on herding behaviour in the NSX. Herding behaviour is found when all equity
stocks are considered, as well as for the sectors save for the Services sector. Results of
the changes in interest rates as proxied by the Johannesburg Interbank Average Rate
(JIBAR) 3 month yield rate reveal positive (negative) effect on herding behaviour. The
exchange rate as proxied by the United States Dollar (USD) to South African Rand (ZAR)
is also found to have both positive and negative effect on herding behaviour in the NSX.
Furthermore, extreme changes in ZAR appreciation and depreciation also amplified and
reduced herding behaviour in the NSX. Thus, coordination and synergy of monetary
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policies between the Republic of Namibia and Republic of South African (RSA) should
be strengthened, since changes in interest rates and exchange rates in South Africa
influence herding behaviour in the NSX
Description
A dissertation submitted in fulfilment of the requirements for the Degree of Doctor of Philosophy in Economics
Keywords
Herding behaviour, Johannesburg Interbank Average Rate (JIBAR), Markov two-Regime Switching model (MRSM), South African Rand (ZAR) appreciation, South African Rand (ZAR) depreciation, Namibia, University of Namibia