Herding by Foreign Institutional Investors: An Evidential Exploration for Persistence and Predictability

Manojit Chattopadhyay, Ashish Kumar Garg and Subrata Kumar Mitra

Journal of Behavioral Finance, 2018, vol. 19, issue 1, 73-88

Abstract: The primary objective of the study is to explore the predictability of herding patterns of foreign institutional investors in the Indian market using high frequency data over a period from January 2003 to June 2014. Herding of an individual stock was measured estimating a simple volume based ratio and persistence of trends was detected using the runs test (Wald and Wolfowitz [1940]) on that ratio. Predictability of herding behavior has been successfully modeled by applying 7 data mining models using various measures of performance. Market regulators may consider our findings to regulate the foreign institutional investors trading to make the financial system more transparent and robust.

Date: 2018
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DOI: 10.1080/15427560.2017.1373282

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