An Examination of Herd Behavior: An Empirical Evidence from Indian Equity Market

Prosad, Jaya Mamta; Kapoor, Sujata; Sengupta, Jhumur

doi:10.7763/ijtef.2012.v3.190

Cited by 42 publications

(36 citation statements)

References 10 publications

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“…They further suggested that market stress can rather help bring the market to equilibrium. Consistent with the findings of Lakshman et al (2008), Prosad, Kapoor and Sengupta (2012) found no evidence of herding in the Indian Stock Market over the period 2006 to 2011 using a sample of Nifty50 stocks (a stock index for 22 sectors of the economy of India). Contrary to the findings above, Farber, Nguyen & Vuong (2006) confirmed the existence of herding on the Ho Chi Minh City Securities Trading Center (HSTC) in Vietnam in stressful market conditions.…”

Section: Literature Reviewsupporting

confidence: 86%

Against the Herd: Contrarian Investment Strategies on the Johannesburg Stock Exchange

Sarpong¹

2014

JEBS

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This study seeks to investigate herd behaviour among equity mutual fund managers and the performance of mutual funds that trade against the herd in South Africa. The behaviour of mutual funds has an effect on the stability and volatility of stock markets, the ultimate returns to the investors. The study builds upon the efficient market hypothesis, portfolio theory and behavioural finance to provide evidence of the behaviour of mutual funds in an emerging market context using the Johannesburg Stock Exchange. The Lakonishok, Shleifer and Vishney (1991) measure of herding is used to ascertain the behaviour of mutual funds over the period 2006 to 2012. Institutional investors in South Africa are susceptible to the behavioural bias of herding and this phenomenon influences the performance of their funds. Funds that trade in the opposite direction of herd funds are able to put up a superior performance over time. Superior performance, however, does not entice mutual fund investors to invest less in under-performing funds and more in funds that recently show superior performance. These findings imply that following investment waves does not culminate in superior returns in the stock market. Consequently, mutual funds that take an opposite direction to herd funds help stabilize the stock market and lessen the severity of bear markets. This study categorizes mutual funds into 'herding' and 'contrarian' and provides an insight into the performance of each category. Investors who oppose herd behaviour realize greater returns over time while stabilizing the markets at the same time.

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Section: Literature Reviewsupporting

confidence: 86%

Against the Herd: Contrarian Investment Strategies on the Johannesburg Stock Exchange

Sarpong¹

2014

JEBS

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“…In contrast to [27], they suggested that herding can be more pronounce before market stress, rather than during market stress since market crisis can lead to market equilibrium. Contrary to the results of [23] who discovered herding in emergent economies such as South Korea and Taiwan; [30] used daily data of fifty (50) from the period of April 2006 to March 2011 and did not find herding in the Indian stock market. Nevertheless, individual tests for bull and bear periods of the market show that herding is detected in larger degree in bull period.…”

Section: Empirical Reviewcontrasting

confidence: 58%

Impact of Stock Market Liquidity on Herding Behaviour: A Comparative Study of Conglomerate and Consumer Goods Sectors

Osamor¹,

Anene²,

Saka³

2019

JFA

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Stock market investors are regarded as rational being, but during stock market liquidity, investors tend to exhibit herding behaviour. Several factors affect stock market liquidity, but the liquidity of Conglomerate and Consumer goods sectors may not be obvious. This study examined the impact of stock market liquidity on herding behaviour of investors in Nigerian stock market with focus on Conglomerate and Consumer goods sectors. Monthly data of stock returns and market capitalization for fifteen years from 2001-2015 were used and 28 companies' stocks from both sectors were considered. OLS model was used to determine the impact, existence and extent of herding behavior in these sectors. The results showed that stock market liquidity had impact on herding behaviour in both sectors and during high and low market liquidity, there is an evidence of herding behaviour which is not statistically significant in Conglomerate sector compared to Consumer goods sector. The study recommended that NSE should make information available to all market participants in order to boost their confidence in making their own decisions.

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“…Iyer and Bhaskar (2002) have explored the role of psychology in investors' stock trading behaviors in India. Prosad et al (2012) find evidences in favor of the standard finance implications and rejects herding behaviors in Indian markets. Sahni (2012) has explored the loss aver-ness behaviors and the effects of anchoring on the Indian stock traders.…”

Section: Research Gapsmentioning

confidence: 87%

Stocks’ pricing dynamics and behavioral finance: A review

Sinha¹

2015

10.5267/j.msl

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In a brief review of the literature on stocks' pricing, the study shows that information vis-à-vis noise serves critical roles in the equilibrium process. It is dynamic in nature and there are different infiltrating aspects from the standard finance to behavioral finance points of views. The aspects of market efficiency, fundamental risk, noise traders' risk, and implementation costs make the stock markets noisy and thereby, limit the arbitrage opportunity of informed traders. Investors' psychological bases viz., belief and preferences contribute more in the equilibrium process. Beliefs include representativeness, conservativeness, and anchoring, availability biases, optimism and wishful thinking, overconfidence, and herd behavior tendency on the part of the investors. On the preferences, investors are influenced by disposition effect, prospects based on reference points, mental accounting, ambiguity aversion, and self control.The study explores the empirical literature also and reviews the six puzzles in the standard finance. Finally, the work identifies a few research gaps to be addressed in the literature.Growing Science Ltd. All rights reserved. 5

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An Examination of Herd Behavior: An Empirical Evidence from Indian Equity Market

Cited by 42 publications

References 10 publications

Against the Herd: Contrarian Investment Strategies on the Johannesburg Stock Exchange

Against the Herd: Contrarian Investment Strategies on the Johannesburg Stock Exchange

Impact of Stock Market Liquidity on Herding Behaviour: A Comparative Study of Conglomerate and Consumer Goods Sectors

Stocks’ pricing dynamics and behavioral finance: A review

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