Detecting the Existence of Herding Behavior in Intraday Data: Evidence from the Indonesia Stock Exchange

Abstract

This study attempts to investigate the issue of the existence of institutional herding in the stock market. The existence is detected in the intraday trade data from the Indonesia Stock Exchange (IDX) during up, down, and stable market condition over the period 2003-2005. By using the model of Lakonishok et al. (1992), it is found that the intensity of the existence of institutional herding at the IDX, on average, is 8.4 percent. Institutional investors do not seem to lead their transactions ina certain characteristic of stock. Most of them follow positive-feedback trading strategy while others follow negative-feedback trading strategy. This study also found that the existence of herd behavior at the IDX did not destabilize the market price in a subsequent period.

Information Asymmetry and Herding Behavior

“…Hwang and Salmon (2004) stated that intensity of herding by institutional investors occurs when the market is more stable. This result is reinforced by Setiyono et al (2013) who found the phenomenon of herding behavior in Indonesia that not only happens in extreme fluctuating market conditions but also when the market is in a stable condition.…”

“…Gunawan et al (2011) found that in Indonesia, herding behavior occurs in a market stress condition, whereas in normal condition or in a condition of very high stock return, investor behavior tends to be more rational. By using the model of Lakonishok et al (1992), Setiyono et al (2013) found that there is institutional herding in Indonesia capital market. The majority of these studies examined herding behavior in capital markets done by individual investors, institutions, as well as analysts/professionals.…”

The Effect of Google Trend as Determinant of Return and Liquidity in Indonesia Stock Exchange

“…He reported that the decision to sell or buy a certain stock is relatively influenced by the information held by the investors. Moreover, Setiyono et al (2013) noted that the trend of herding behavior clearly exists in emerging markets such as Indonesia.…”

Niat Melakukan Pencatatan Akuntansi pada Usaha Kecil Menengah: Pengetahuan Akuntansi ataukah Herding?

“…Hal ini terjadi karena seseorang memiliki keterbatasan dalam berfikir, yang disebabkan karena kemampuan individu yang kurang memadai dan kurangnya informasi yang diterima, sehingga seseorang lebih memilih untuk berfikir, bertindak, dan berperilaku sama dengan orang orang lain di sekitarnya. Setiyono et al (2013) mengatakan, perilaku herding dapat dijelaskan dalam tiga hal, yakni informational based herding, informational aqcuisition herding, dan reputation and compensation herding. Informational based herding yakni dalam kondisi yang tidak pasti dan informasi yang sepenuhnya sempurna, pertukaran informasi antar individu akan meningkatkan pengetahuan akan kondisi tertentu yang berdampak pada pengambilan keputusan.…”

“…Adanya interaksi dengan pengusaha UKM lain yang sudah membuat pencatatan akuntansi akan menimbulkan pertukaran informasi mengenai usaha yang dijalankan. Pertukaran informasi dari satu individu dengan individu yang lain akan meningkatkan pengetahuan akan situasi tertentu yang berdampak pada pengambilan keputusan, yang disebabkan karena informasi yang tidak sepenuhnya tersedia (Setiyono et al, 2013). Hal ini menyebabkan kecenderungan individu untuk mengamati dan mempelajari perilaku individu lainnya.…”