Stata codes for herding behavior | CSSD | CSAD

Herding behavior

We have Stata codes for testing models of herding behavior( Christie & Huang, 1995 ; Chang et al. 1999). The Stata code finds CSAD and CSSD.

Herd behavior in financial markets is one example of market inefficiency. It is the tendency of individuals to mimic the actions (whether rational or irrational) of other investors. Several models have been used by empirical researchers to model herd behavior. The most commonly used models are Christie and Huang (1995) and Chang et al. (1999).

Christie and Huang (1995) measure dispersion in equity returns using this equation.

CSSD = \sqrt{\dfrac{\sum_{i=1}^{n}(r_i-\bar{r})^2}{n-1}}

Then they tested whether the dispersion of returns significantly differed between two extreme market states. They used the following regression:

CSSD_t = \alpha + \beta{_1}{D}^{L}_{t}+\beta{_2}{D}^{U}_{t}+\epsilon{_t},

where ${D}^{L}_{t} = 1$ if the market return on day $t$ lies in the extreme lower tail of the return distribution, otherwise 0 and

{D}^{U}_{t} = 1

if the market return on the day

t

lies in the extreme upper tail of the return distribution, 0 otherwise.
Rational asset pricing models predict significantly positive coefficient for

\beta{_1}

and

\beta{_2}

. However, if these coefficients are negative, it would be consistent with the presence of herd behavior.

Stata Code

We have developed easy to use yet robust codes for estimating herd behavior using the above-mentioned models. Specifically, our codes estimate cross-sectional standard deviation of returns (CSSD) as a measure of the average proximity of individual asset returns to the realized market average CSSD (Christie and Huang 1995); and cross-sectional absolute deviation of returns, i.e., CSAD of Change et al. (1999). The codes need just a basic understanding of Stata. Further, our comments with each line of code will surely help you to not only apply the code but also understand the process more clearly.

Is the code accurate?

Our codes have undergone rigorous testing to ensure their accuracy and reliability. We have implemented comprehensive validation processes to verify the correctness of our codes. Our team has meticulously reviewed and tested every aspect of the codebase, leaving no room for errors or inconsistencies. Through extensive testing, we have confirmed that our codes perform as intended, delivering reliable results. We are confident in the quality and correctness of our codes, providing you with a solid foundation for your work.

Pricing

The code for any of the two models is available for 99 USD with some example data. And the code for both the models is avaiable for $150. If you need help with data processing or application of the code to your data, you may contact us for help. Payment can be made using any of the following methods.

PayPal email: stata.professor@gmail.com

Wise bank transfer (preferred due to low transaction costs).

For further details, please contact us at:

aullah.shah@imsciences.edu.pk
Stata.Professor@gmail.com

About the developer

Dr. Attaullah Shah is a Ph.D. in Finance, and a post-doctoral fellow of the University of Kentucky, USA. He brings over 20 years of extensive experience in developing cutting-edge Stata packages and writing robust codes for various financial analyses. With a strong background in finance and a deep understanding of quantitative methodologies, Dr. Attaullah Shah has successfully developed codes for portfolio creation, asset pricing, cost of equity estimation, event studies, and many other applications.

Having authored several Stata packages, Dr. Attaullah Shah has established a reputation for delivering high-quality, reliable solutions to the financial research community. With a passion for facilitating knowledge transfer, Dr. Shah has designed the code and accompanying resources to be user-friendly, even for those with basic understanding of Stata.

Dr. Shah is committed to providing exceptional support and ensuring that researchers can seamlessly apply these codes to their own projects. By leveraging Dr. Shah’s expertise and extensive experience, you can trust that this code is built on a solid foundation of academic rigor and practical applicability. View his academic contributions and software development here.

What is included in the package?

Data preparation
Variable creation
Detailed comments on each line of code
Exporting results tables with asdoc
Example data file
Email support in case if there is any query

How the process works?

Once the payment is received, we guarantee to share the codes and relevant files within 24 hours. You can expect to receive them promptly through email. Our efficient process ensures a smooth and timely delivery of the materials you need to begin your analysis.

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References

Christie, W. G., & Huang, R. D. (1995). Following the pied piper: do individual returns herd around the market?. Financial Analysts Journal, 51(4), 31-37.

Chang, E. C., Cheng, J. W., & Khorana, A. (2000). An examination of herd behavior in equity markets: An international perspective. Journal of Banking & Finance, 24(10), 1651-1679.