Evidence of Information Asymmetry and Herding Behaviour – The Swiss Franc Unpegging Event in Perspective
Keywords:Hill Estimator, Hurst Exponent, Granger Causality, Information Asymmetry, Herding, Swiss Franc Unpegging, Fat-Tail Event
The paper aims to find the impact of financial events that occurred in one country on another. Taking the case of the Swiss Franc Unpegging of 2015 in Switzerland, the paper observes its impact on the Indian economy. This is done by studying the information asymmetry and herding behaviour in Indian market on the day of the event. The study uses two sets of data, (i) high frequency data and (ii) 3 years index data of both countries. The Ganger Causality test has been conducted to study the cause and effect relationship between the economies, which helps determine the impact on any of the countries. The study found that herding behaviour and information asymmetry in Indian market are now linked to each other in such a way that the country is affected even if the event has not occurred in the economy itself, however, only for a short duration of time. There also seems to be a huge gap between information available amongst all investors.