Impact of herding on the returns in the Indian stock market: an empirical study

Kanojia, Sunaina; Singh, Deepti; Goswami, Ashutosh

doi:10.1108/rbf-01-2020-0017

Cited by 16 publications

(17 citation statements)

References 24 publications

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“…It suggests that herding is not an important factor in determining equity returns during periods of large swings in market prices. The results are in conformity with the findings of some other studies on the Indian market, such as Kanojia et al ( 2020 ).…”

Section: Resultssupporting

confidence: 93%

Trading Behaviour of Foreign Institutional Investors: Evidence from Indian Stock Markets

Mukherjee

Tiwari

2022

Asia-Pac Financ Markets

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The existence of behavioural bias such as positive feedback trading (PFT) and herding is well researched for advanced economies. This paper explores whether foreign institutional investors (FIIs), a prominent investor group, pursue these strategies in India. The contribution lies in the application of multiple measures of herding. Results indicate that FIIs exhibit PFT behaviour in equity and to some extent, in debt. At the individual stock level, FIIs herd during non-extreme market conditions, but market-level measures indicate absence of herding in extreme market conditions. In the bullish market, they behave more rationally compared to bearish or normal market conditions.

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Section: Resultssupporting

confidence: 93%

Trading Behaviour of Foreign Institutional Investors: Evidence from Indian Stock Markets

Mukherjee

Tiwari

2022

Asia-Pac Financ Markets

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“…Herding occurs when investors make financial decisions based on the collective actions of others while ignoring their own private information and signals (Chang et al, 2000;Rook, 2006). Interestingly, Kanojia et al (2020) find no evidence of herding in any of the market cycles they studied over a period of 10 years. In contrast, Jain et al (2020), with the help of fuzzy analytic hierarchy process, find that herding is an important and significant criterion in decision-making.…”

Section: Herdingmentioning

confidence: 81%

“…Herding occurs when investors make financial decisions based on the collective actions of others while ignoring their own private information and signals (Chang et al ., 2000; Rook, 2006). Interestingly, Kanojia et al . (2020) find no evidence of herding in any of the market cycles they studied over a period of 10 years.…”

Section: Theoretical Underpinningsmentioning

confidence: 99%

Antecedents to heuristics: decoding the role of herding and prospect theory for Indian millennial investors

Goyal

Gupta

Yadav

2021

RBF

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PurposeThe purpose of this paper is to explore how heuristics are formed and whether herding and prospect theory act as antecedents to heuristics. The relationship is explored specifically for millennials.Design/methodology/approachThe proposed relationship is explored specifically for millennials. Herding and prospect theory are modelled as antecedents to heuristics. The study uses survey data from 923 millennials from India to test the model for two financial products: equity and mutual funds. Regression analysis is used to evaluate the model.FindingsFindings support the role of herding and prospect theory as antecedents to heuristics of millennials although to varying degrees for equity and mutual fund investments. The impact of herding on heuristics is likely to be smaller for equity investments as compared to mutual fund investments.Research limitations/implicationsThe findings provide insights into how heuristics are formed for millennials. The findings add to literature by beginning a new line of inquiry on how heuristics are formed. Since the model is tested on a single generation, future research can test the model on other generations. In addition, future research can also add more antecedents to our proposed model.Practical implicationsFindings from this study can provide financial planners and marketers with an understanding of how heuristics are formed for millennials. Financial planners can use these insights while providing financial advice to this generation and marketers can use them to create more relevant outreach.Social implicationsFinancial investments are an important conduit for financial security. By understanding the cognitive processes that influence financial investment decision-making, it is possible for educators to create content appropriately and for financial planners to advise clients accordingly to enable optimal financial decisions that will be wealth-creating.Originality/valueExisting literature primarily treats heuristics, herding and prospect theory as being independent of each other. The authors take a novel approach to model the antecedents to heuristics to be herding and prospect theory. The model is tested on millennials for two financial products: equity and mutual funds.

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“…In recent years, significant research has focused on the effects of herding behavior on stock market volatility (Bekiros et al, 2017;Chauhan et al, 2020). As herding behavior is a considerable cause of the speculative bubble and leads to stock market deviations from their basic values (Kanojia et al, 2020), it is necessary to examine the motivators which led to herding behavior among investors. These undesirable consequences of herding highlight the need to identify herding behavior in financial markets.…”

Section: Jel Classification -G0 G4mentioning

confidence: 99%

What make investors herd while investing in the Indian stock market? A hybrid approach

Sachdeva

Lehal

Gupta³

et al. 2021

RBF

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PurposeIn recent years, significant research has focused on the question of whether severe market periods are accompanied by herding behavior. As herding behavior is a considerable cause of the speculative bubble and leads to stock market deviations from their basic values it is necessary to examine the motivators which led to herding behavior among investors. The paper aims to discuss this issue.Design/methodology/approachIn this study, the authors performed a two-phase analysis to address the research questions of the study. In the first phase, for text analysis NVivo software was used to identify the factors driving herding behavior among Indian stock investors. The analysis of a text was performed using word frequency analysis. While in the second phase, the Fuzzy-AHP analysis techniques were employed to examine the relative importance of all the factors determined and assign priorities to the factors extracted.FindingsResults of the study depicted Investor Cognitive Psychology (ICP), Market Information (MI), Stock Characteristics (SC) as the top-ranked factors driving herding behavior, while Socio-Economic Factors (SEF) emerged as the least important factor driving herding behavior.Research limitations/implicationsThe current study was undertaken among stock investors from North India only. Moreover, numerous factors are not part of the study but might significantly influence the investors' herding behaviors.Practical implicationsComprehending the influences of the different factors discussed in the study would enable stock investors to be more aware of their investment choices and not resort to herd behavior. This research enables decision-makers to understand the reasons for herd activity and helps them act accordingly to improve the stock market's performance.Originality/valueThe current study will provide an inclusive overview of herding behavior motivators among Indian stock investors. This study's results can be extremely useful for both academics and policymakers to gain some insight into the functioning of the Indian stock market.

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Impact of herding on the returns in the Indian stock market: an empirical study

Cited by 16 publications

References 24 publications

Trading Behaviour of Foreign Institutional Investors: Evidence from Indian Stock Markets

Trading Behaviour of Foreign Institutional Investors: Evidence from Indian Stock Markets

Antecedents to heuristics: decoding the role of herding and prospect theory for Indian millennial investors

What make investors herd while investing in the Indian stock market? A hybrid approach

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