The Impact of Herding Behavior on Stock Market Financial Performance: The Case of Norway

Using a time series approach, this thesis empirically investigates the impact of investor herding behavior on stock market financial performance for the case of Norway over the 1981-2019 period. Total values of stocks traded (% of GDP) and market capitalization of listed domestic companies (% of GDP) have been used as measures for investor herding behavior and stock market financial performance, respectively, with annual data for both variables being obtained from the World Development Indicators (WDI) of the World Bank. Unit root tests indicate that both variables are integrated of order one, and Johansen cointegration test reveals that there is a long-run relationship between the variables. The coefficients estimated by the vector error correction model indicate that investor herding behavior has a statistically-significant positive impact on the stock market financial performance of Norway in the long-run, while a negative impact was revealed in the short-run.