Authors: Neelam Rani; Aman Asija
Addresses: 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.
International Journal of Behavioural Accounting and Finance, 2015 Vol.5 No.3/4, pp.334 - 345
Available online: 15 Mar 2016Full-text access for editors Access for subscribers Purchase this article Comment on this article