This study examines herding behavior within the ESG segment of the U.S. stock market, both at the aggregate and sectoral levels.
The analysis employs both static and time-varying approaches to detect herding behavior. It distinguishes between aggregate market-level and sector-level herding and further investigates the impact of market conditions, liquidity and geopolitical events (e.g. the Russia–Ukraine conflict) on herding dynamics.
The results indicate no evidence of herding at the aggregate market level. However, sectoral analysis identifies significant herding in the communication sector under both bullish and bearish conditions. Additionally, herding is more pronounced during periods of high or moderate liquidity in the Consumer Staples, Real Estate and Utilities sectors. The Russia–Ukraine conflict exacerbates herding across eight of the eleven sectors. The time-varying analysis confirms the static analysis findings, showing intensified herding behavior during high uncertainty periods.
This study provides novel insights into the presence of herding behavior within the ESG segment of the U.S. stock market, offering a sector-specific perspective. It highlights the influence of liquidity, geopolitical crises and market uncertainty on herding behavior, contributing to the broader literature on behavioral finance and ESG investing.
