Traces of Herd Behaviour Over a Decade in Indian Stock Markets
Year: 2024
Type: article
Abstract: This study investigates herd behaviour in the Indian Stock Market from 2011 to 2020, analysing daily returns of stocks listed in the S&P BSE 500 index. By employing the Chang, Cheng and Khorana model, the research assesses the presence and impact of herding behaviour across various market conditions, industry sectors and timeframes. The findings reveal nuanced patterns of investor behaviour, with evidence of herd behaviour particularly pronounced during down-market conditions, as indicated by negative and statistically significant coefficients of cross-sectional absolute dispersion returns. Sector-specific analysis unveils varying degrees of herd behaviour, with strong evidence observed in the capital goods and IT sectors, while banking displays a propensity for independent decision-making. The study identifies market capitalization and year-wise variations in herd behaviour, highlighting the dynamic nature of investor sentiment and its implications for market functioning and stability. This comprehensive empirical analysis contributes to a deeper understanding of herd behaviour in the Indian Stock Market, offering valuable insights for investors, policymakers and market participants. The study underscores the importance of considering contextual factors, such as market conditions and industry dynamics, in analysing investor behaviour and its impact on market dynamics. The findings have practical implications for informed decision-making and regulatory interventions aimed at promoting market efficiency and resilience. By elucidating the drivers and consequences of herd behaviour across different dimensions, this research enhances our knowledge of investor behaviour and lays the groundwork for further studies in this area, emphasizing the need for ongoing research to navigate the complexities of financial markets and ensure their stability and integrity.
Authors: Nagendra Marisetty, Kompalli Sasi Kumar
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: gold
OpenAlex ID: W4404972164