Covid-19 and Short-Term Herding in the Indian Stock Market: An Exploratory Analysis

Indrani Chakraborty ()
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Indrani Chakraborty: Institute of Development Studies Kolkata (IDSK)

Chapter Chapter 3 in Exploring What Drives Indian Stock Market During Covid-19, 2023, pp 35-49 from Springer

Abstract: Abstract This chapter deals with the issue of short-term herding in the stock market following the emergence of Covid-19. We examine the existence of herding behaviour in Indian stock market during the period 1 January 2019 to 18 May 2021, using the CSAD approach proposed by Chang et al. (J Banking Finan 24(2–3(April–May)):1651–1679, 2000). We take the periods February-May 2020 and March–May 2021 as the Covid-19 crisis periods. During these periods, strong lockdown measure was implemented in India, and the death rate due to Covid-19 was high. Our analyses based on daily data support investor herding during this period, while those based on weekly and monthly data produce much weaker evidence, suggesting that herding is a short-run phenomenon. Therefore, our finding suggests that investors in the Indian stock market made investment choices irrationally during the Covid-19 crisis periods. The presence of herding behaviour indicates that the stock market is inefficient and it would bring instability in the stock market.

Keywords: Herding behaviour; Covid-19; Lockdown; Investors; Daily data; Weekly data; Monthly data; Instability; Stock market (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:spbchp:978-981-19-8001-5_3

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DOI: 10.1007/978-981-19-8001-5_3

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