Int. J. of Behavioural Accounting and Finance   »   2015 Vol.5, No.3/4



Title: Do Indian investors also follow the pied piper? A case for pre- and post-financial crisis


Authors: Neelam Rani; Aman Asija


Indian Institute of Management, Shillong 793014, India
Indian Institute of Management, Shillong 793014, India


Abstract: The phenomenon of market-wide herding emerges when investors choose to ignore firm-specific information and instead decide to follow the market. This paper explores the presence of herding behaviour in the Indian stock market by implementing cross-sectional absolute deviation technique. The study also compares the presence of herding behaviour in both pre- and post-crisis periods. The findings reveal strong evidence of herding behaviour during extreme market upturn while anti-herding tendencies dominated at times of extreme downturn. Moreover, a change has been observed in the herding behaviour over time. During the pre-crisis period, there was anti-herding for the upward movement, but herding has been observed for the downward movement. It may be due to ambiguity created in the market during such reversals. The post-crisis period exhibits strong evidence for herding during upturns. Positive outlook of investors towards the Indian market leads to a speedy recovery after a financial crisis. Contrary to popular belief, anti-herding has dominated during the period of financial crisis.


Keywords: herding behaviour; financial crisis; market efficiency; market returns; behavioural finance; investor sentiment; information asymmetry; cross-sectional absolute deviation; large stocks; intentional herding; spurious herding; India; stock markets.


DOI: 10.1504/IJBAF.2015.075344


Int. J. of Behavioural Accounting and Finance, 2015 Vol.5, No.3/4, pp.334 - 345


Submission date: 16 Jun 2015
Date of acceptance: 21 Oct 2015
Available online: 15 Mar 2016



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