Herding behaviour and monetary policy: Evidence from the ZAR market

We investigated the presence of herding and its interactions with monetary policy in the ZAR market. We achieved this using both the standard herding tests and Sim and Zhou's (2015) quantile-on-quantiles regressions. Similar to previous results in other markets, we found that extreme market events mainly drove herding behaviour in the ZAR market. This result was also significant in the presence of monetary policy announcements. However, herding in the ZAR markets was not related to market fads. It, therefore, was, in the main, a rational response to public information, indicating central bank credibility. This credibility gives scope to the central bank to improve communication in periods of market crisis to dampen potential volatility. Further studies on the herding of specific ZAR market participants can be invaluable.