Title: The herding behaviour on Pakistan stock exchange – using firm-level data

Authors: Fasiha Kiran; Naimat U. Khan; Attaullah Shah

Addresses: Institute of Management Studies, University of Peshawar, Peshawar, Pakistan ' Institute of Management Studies, University of Peshawar, Peshawar, Pakistan ' Institute of Management Sciences, 1-A, Sector E/5, Phase – VII, Hayatabad, Peshawar, Pakistan

Abstract: This paper analyses herding behaviour in the Pakistan stock exchange (PSX, formerly known as Karachi stock exchange, KSE) for a sample of 663 firms over a period of 13 years, from 2004 to 2017. For detecting herding behaviour, two dependent variables are used, i.e., cross-sectional standard deviation (CSSD) of Christie and Huang (1995) and cross-sectional absolute deviation (CSAD) of Chang et al. (2000). The results show no herding behaviour on the basis of both methods at different levels of market movements. The absence of the herding behaviour may be because these firms belong to different sectors which may follow their respective industry portfolios but not the overall market; for example, Shah et al. (2017) documented that firms in several industries herd toward their industry portfolios for Pakistani data. Future research can be done using a primary data collection method from investors about their opinion on herding behaviour.

Keywords: herding; anomaly; efficient market hypothesis; behavioural finance; Pakistan.

DOI: 10.1504/AAJFA.2020.104407

Afro-Asian Journal of Finance and Accounting, 2020 Vol.10 No.1, pp.71 - 84

Received: 03 Oct 2017
Accepted: 12 May 2018
Published online: 10 Jan 2020 *

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