Do conventional and new energy stock markets herd differently? Evidence from China

This research investigates herding formation in a competing market setting of China's conventional and new energy stock markets, making it the first of its kind to specify the difference in herding across these markets. Our results highlight investors' tendency to herd in both types of energy markets with herding stronger for new energy stocks. Such a behavior tends to vary over time, displaying a dynamic pattern. Mixed evidence appears for the COVID-19 effect on herding: new energy stock investors choose to follow market consensus during the pandemic period, whereas their decision does not apply to conventional energy stock investors. Finally, information arrivals from the conventional energy market barely influence herding in the new energy market, while those from the new energy market help weaken herding in the conventional energy market. The evidence provides important implications for both energy stock investors and financial regulators.

Automated summary

This research specifies the difference in herding across China's conventional and new energy stock markets and finds that herding is stronger for new energy stocks. The study also reveals that during the COVID-19 pandemic, new energy stock investors tend to follow market consensus, while conventional energy stock investors are not influenced. Furthermore, information arrivals from the new energy market help weaken herding in the conventional energy market, highlighting the importance of information dissemination.