Analysing Existence of Herding Behaviour in Various Stock Markets-A Theoretical Framework

Abstract

Volatility in financial markets across world is always a major cause of concern for participants in markets; be it entrepreneurs, investment managers, brokers, and individual investors. History reveals that irrationalities in investment behaviouris the major contributor to the booms and busts in the market. Ludicrousness exists in financial markets due to biased human behaviour. Herding is one such behavioural anomaly which defies Efficient Market Hypothesis.The present study focuses upon review of existing literature about herding behaviour in stock markets and attempts to investigate the existence of herding behaviour in India by employing CSAD methodology. Various studies done on herding behaviour has been considered to find out whether stock market supports herding behaviour or not.