The IUP Journal of Applied Economics
Herding Behavior and Market Conditions: Empirical Evidence from Bombay Stock Exchange, India

Article Details
Pub. Date : Oct, 2019
Product Name : The IUP Journal of Applied Economics
Product Type : Article
Product Code : IJAE11910
Author Name : Payal Goel
Availability : YES
Subject/Domain : Economics
Download Format : PDF Format
No. of Pages : 17

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Abstract

The study seeks to investigate how market participants behave, with special reference to herd behavior wherein investors imitate the investment patterns of their fellow investors. It further explores the magnitude of such behavior not only during normal circumstances, but also during severe upswings and intense downturns, with special focus on the Indian stock market. Two most extensively time-honored models given by Christie and Huang (1995) and Chang et al. (2000) have been applied to examine the herding component by scrutinizing the wide dispersions of the security returns as regards the standard market model on a large dataset of monthly returns of BSE 500 index for a period of 18 years, i.e., from April, 2000 to March, 2018. The study found absence of herding behavior in the Indian stock market.


Description

Academic research has always been inclined towards revealing the significant aspects of investment decisions made by the retail investors and the professional money managers. The investment behavior of the market participants has been connected to factors such as maturity composition, volatility shocks, stress in the economy, the degree of uncertainty in the financial market, volume of trading activity, etc. The behavior of the investors and the psychology behind making their investment decisions become extremely imperative for the policymakers as the ups and downs of the market are closely linked with the investor’s sentiments.

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