Herding Behavior in the Indian Stock Market : An Empirical Study

Authors

  •   Pooja Gupta Assistant Professor, Jagdish Sheth School of Management (Formerly IFIM B School), 8 P & 9 P, KIADB Industrial Area, Electronic City Phase I, Bengaluru - 560 100, Karnataka
  •   Bindya Kohli Associate Professor, Symbiosis School of Banking and Finance, Symbiosis International (Deemed University), Pune - 412 115, Maharashtra

DOI:

https://doi.org/10.17010/ijf/2021/v15i5-7/164495

Keywords:

Herding

, Indian Stock Market, Behavioral Finance.

JEL Classification Codes

, D53, E44, G40, G41.

Paper Submission Date

, April 18, 2020, Paper sent back for Revision, November 2, Paper Acceptance Date, March 3, 2021, Paper Published Online, July 5, 2021.

Abstract

The herding behavior in financial markets indicates the process whereby the different participants of the market trade in a similar direction simultaneously. This kind of trading pattern seems like a consensus in the market. There are different reasons for herding to exist : to be part of a group, to avoid the feeling of being left out, reaction to some kind of new information, etc. In this paper, we tried to identify the existence of herding behavior in the Indian stock market. The markets were examined over a time frame of the last 15 years to determine the existence of herding behavior at various points of time. The three time periods selected for the study were 2003 – 2007 (pre - financial crisis), 2008 – 2012 (sub-prime crisis), and 2013 – 2017 (post) crisis. The study used security return dispersion as a substitute for herd behavior. In order to test the presence of herding behavior, linear regression model using dummy variables was used. The evidence supported the presence of herding in the Indian stock market during the financial crisis time period and the post-crisis period. In the pre - financial crisis period, there was no herding phenomenon observed.

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Author Biographies

Pooja Gupta, Assistant Professor, Jagdish Sheth School of Management (Formerly IFIM B School), 8 P & 9 P, KIADB Industrial Area, Electronic City Phase I, Bengaluru - 560 100, Karnataka

ORCID iD : https://orcid.org/0000-0002-3480-3579

Bindya Kohli, Associate Professor, Symbiosis School of Banking and Finance, Symbiosis International (Deemed University), Pune - 412 115, Maharashtra

ORCID iD : http://orcid.org/0000-0002-8479-7306

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Published

2021-07-31

How to Cite

Gupta, P., & Kohli, B. (2021). Herding Behavior in the Indian Stock Market : An Empirical Study. Indian Journal of Finance, 15(5-7), 86–99. https://doi.org/10.17010/ijf/2021/v15i5-7/164495

Issue

Volume 15, Issue 5-7, May-July 2021

Section

Articles
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Europe PMC

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