Impact of herding on the returns in the Indian stock market: an empirical study

Sunaina Kanojia, Deepti Singh and Ashutosh Goswami

Review of Behavioral Finance, 2020, vol. 14, issue 1, 115-129

Abstract: Purpose - Herd behavior has been studied herein and tested based on primary respondents from Indian markets. Design/methodology/approach - The paper expounds the empirical evidence by applying the cross-sectional absolute deviation method and reporting on herd behavior among decision-makers who are engaged in trading in the Indian stock market. Further, the study attempts to analyze the market-wide herding in the Indian stock market using 2230 daily, 470 weekly and 108 monthly observations of Nifty 50 stock returns for a period of nine years from April 1, 2009 to March 31, 2018 during the normal market conditions, extreme market conditions and in both increasing and decreasing market conditions. Findings - In a span of a decade witnessing different market cycles, the authors’ results exhibit that there is no evidence of herding in any market condition in Indian stock market primarily due to the dominance of institutional investors and secondly because of low market participation by individual investors. Originality/value - The results reveal that there is no impact of herd behavior on the stock returns in the Indian equity market during the normal market conditions. It highlights that the participation of individuals who are more prone to herding is more evident for short-run investments, contrary to long-term holdings.

Keywords: Herd behavior; Stock return; Indian stock market; G14; G15; G41 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rbfpps:rbf-01-2020-0017

DOI: 10.1108/RBF-01-2020-0017

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