Existence of Herding Behaviour in the Indian Stock Market: An Empirical Analysis During the COVID-19 Period

Jump To References Section

Authors

  • Ved Prakash
     Department of Commerce, Central University of Karnataka, Kalaburagi – 585367, Karnataka ,IN
  • K. Padmasree
     Department of Commerce, Central University of Karnataka, Kalaburagi – 585367, Karnataka ,IN
  • Sarwdaman Kashyap
     Department of Economics, Government Polytechnic College Jehanabad, Sultanpur – 804405, Bihar ,IN

DOI:

https://doi.org/10.18311/sdmimd/2024/32813

Keywords:

Covid-19 Pandemic, Herding Behavior, Indian Stock Market (ISM), National Stock Exchange

Abstract

The current study focuses on herding behaviour that occurred in the “Indian Stock Market (ISM)” between 2011 and during the time of the Covid-19 pandemic. The study examines the closing price of the NSE benchmark Nifty and 33 companies from three sectoral indices selected out of fifteen available on a daily basis. The sectors are the Auto sector, Nifty Bank, and IT sector, from 1 January 2011 to 31 December 2020. Christie and Huang (1995) suggested the CSSD and Chang, et al. (2000) suggested the CSAD models to study the existence of herding behavior during the Covid-19 period. Findings based on the daily closing price reveal that for the ten-year data, no significant herding is present in the market, whereas Covid-19 had caused herding during the rising (up) and falling (down) market. The calculated herding period during the Covid-19 timeframe is from 11 March 2020 to 31 December 2020. The study found no herding between 1st January 2011 to 31 December 2019 in the ISM. The herding was evident during the Covid-19 time frame, possibly due to emotional biases, fear, and uncertainty of the pandemic. The study will be helpful to investors, decision-makers, and market regulators in decisionmaking in the capital market. It will also facilitate brokers and market participants to prepare different trading strategies to be successful in regular times and times of adversity.

Downloads

Download data is not yet available.

Metrics

Metrics Loading ...

Downloads

Published

2024-02-13

How to Cite

Prakash, V., Padmasree, K., & Kashyap, S. (2024). Existence of Herding Behaviour in the Indian Stock Market: An Empirical Analysis During the COVID-19 Period. SDMIMD Journal of Management, 15(1), 31–40. https://doi.org/10.18311/sdmimd/2024/32813

Issue

Volume 15, Issue 1, March 2024

Section

Articles

License

Copyright (c) 2023 Ved Prakash, K. Padmasree, Sarwdaman Kashyap

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Crossref
Scopus
Google Scholar
Europe PMC

 

References

Abdeldayem, M. M., & Al Dulaimi, S. H. (2020). Investors’ herd behavior related to the pandemicrisk reflected on the GCC stock markets· TT - Psihologija stada investitora i pandemijski rizik na tržištu dionica zemalja arapskog zaljeva. Zbornik Radova Ekonomski Fakultet u Rijeka.

Avery, B. C., & Zemsky, P. (1998). Multidimensional uncertainty and herd behavior in financial markets. The American Economic Review, 88(4), 724–748. https://www.jstor.org/stable/117003

Barberis, N., & Shleifer, A. (2003). Style investing. Journal of Financial Economics. https://doi. org/10.1016/S0304-405X(03)00064-3 DOI: https://doi.org/10.1016/S0304-405X(03)00064-3

Bhatia, P., & Gupta, P. (2020). Sub-prime crisis or COVID-19: A comparative analysis of volatility in Indian Banking sectoral indices. FIIB Business Review, 9(4), 286–299. https://doi. org/10.1177/2319714520972210 DOI: https://doi.org/10.1177/2319714520972210

Bikhchandani, S., & Sharma, S. (2000). Herd behavior in financial markets. IMF Staff Papers. https://doi. org/10.5089/9781451846737.001 DOI: https://doi.org/10.2139/ssrn.228343

Bora, D., & Basistha, D. (2021). The outbreak of COVID-19 pandemic and its impact on stock market volatility: Evidence from a worst-affected economy. Journal of Public Affairs, 21(4). https:// doi.org/10.1002/pa.2623 DOI: https://doi.org/10.1002/pa.2623

Chang, E. C., Cheng, J. W., & Khorana, A. (2000). An examination of herd behavior in equity markets: An international perspective. Journal of Banking and Finance, 24(10), 1651–1679. https://doi. org/10.1016/S0378-4266(99)00096-5 DOI: https://doi.org/10.1016/S0378-4266(99)00096-5

Chiang, T. C., & Zheng, D. (2010). An empirical analysis of herd behavior in global stock markets. Journal of Banking and Finance, 34(8), 1911–1921. https://doi.org/10.1016/j.jbankfin.2009.12.014 DOI: https://doi.org/10.1016/j.jbankfin.2009.12.014

Christie, W. G., & Huang, R. D. (1995). Following the Pied Piper: Do Individual returns herd around the market? Financial Analysts Journal, 51(4), 31–37. https://doi.org/10.2469/faj.v51.n4.1918 DOI: https://doi.org/10.2469/faj.v51.n4.1918

Dhall, R., & Singh, B. (2020). The COVID-19 Pandemic and Herding Behaviour: Evidence from India’s Stock Market. Millennial Asia, 11(3), 366– 390. https://doi.org/10.1177/0976399620964635 DOI: https://doi.org/10.1177/0976399620964635

Economou, F., Philippas, N., & Caporale, G. M. (2008). Herding behaviour in extreme market conditions : the case of the Athens stock exchange herd behaviour in extreme market conditions : December 2015.

Espinosa-méndez, C., Arias, J., & Espinosa-méndez, C. (2020). Herding behaviour in Asutralian stock market : Evidence on COVID-19 effect herding behaviour in Asutralian stock market : Evidence on COVID-19 effect. Applied Economics Letters, 00(00), 1–4. https://doi.org/10.1080/13504851.202 0.1854659

Hallahan, T. A., Faff, R. W., & Mckenzie, M. D. (2004). Geeft verschillende regressievergelijken weer. Financial Services Review, 13, 57–78.

Hirshleifer, D., & Hong Teoh, S. (2003). Herd behaviour and cascading in capital markets: A review and synthesis. European Financial Management. https://doi.org/10.1111/1468-036X.00207 DOI: https://doi.org/10.1111/1468-036X.00207

Kahneman, D., Tversky, A., Econometrica, S., Mar, N., Kahneman, B. Y. D., & Tversky, A. (1979). Prospect Theory : An Analysis of Decision under Risk. 47(2), 263–292. https://doi. org/10.2307/1914185 DOI: https://doi.org/10.2307/1914185

Kumar, S., & Goyal, N. (2016). Evidence on rationality and behavioural biases in investment decision making. Qualitative Research in Financial Markets, 8(4), 270–287. https://doi.org/10.1108/ QRFM-05-2016-0016 DOI: https://doi.org/10.1108/QRFM-05-2016-0016

Lakonishok, J., Shleifer, A., & Vishny, R. W. (1992). The impact of institutional trading on stock prices. Journal of Financial Economics, 32(1), 23–43. https://doi.org/10.1016/0304-405X(92)90023-Q DOI: https://doi.org/10.1016/0304-405X(92)90023-Q

Lao, P., & Singh, H. (2011). Herding behaviour in the Chinese and Indian stock markets. Journal of Asian Economics, 22(6), 495–506. https://doi. org/10.1016/j.asieco.2011.08.001 DOI: https://doi.org/10.1016/j.asieco.2011.08.001

Mertzanis, C., & Allam, N. (2018). Political instability and herding behaviour: Evidence from Egypt’s Stock Market. Journal of Emerging Market Finance, 17(1), 29–59. https://doi. org/10.1177/0972652717748087 DOI: https://doi.org/10.1177/0972652717748087

Poshakwale, S., & Mandal, A. (2014). Investor behaviour and herding: Evidence from the National Stock Exchange in India. Journal of Emerging Market Finance, 13(2), 197–216. https://doi. org/10.1177/0972652714541341 DOI: https://doi.org/10.1177/0972652714541341

Prosad, J. M., Kapoor, S., & Sengupta, J. (2012a). An examination of herd behavior : An empirical study on Indian Equity Market. An Examination of Herd Behavior: An Empirical Study on Indian Equity Market, 32, 11–15. https://doi.org/10.7763/ IJTEF.2012.V3.190

Prosad, J. M., Kapoor, S., & Sengupta, J. (2012b). An examination of herd behavior: An empirical evidence from Indian Equity Market. International Journal of Trade, Economics and Finance, 154– 157. https://doi.org/10.7763/IJTEF.2012.V3.190 DOI: https://doi.org/10.7763/IJTEF.2012.V3.190

Raimundo Júnior, G. D. S., Klotzle, M. C., Pinto, A. C. F., & Luis Leite, A. (2020). Political risk, fear, and herding on the Brazilian stock exchange. Applied Economics Letters, 27(9), 759–763. https://doi.org/ 10.1080/13504851.2019.1645271 S.C.B. DOI: https://doi.org/10.1080/13504851.2019.1645271

Samuel Anbu Selvan, R. G. (2020). COVID- 19 effect on herding behaviour in Indian capital market. 17(4)(February), 2432–2440.

Satish, B. (2020). An empirical analysis of herding behaviour in Indian Stock Market an empirical analysis of herding behaviour in Indian Stock Market. 3(July). https://doi.org/10.18843/ijms/ v5i3(3)/15 DOI: https://doi.org/10.17010/ijf/2021/v15i5-7/164495

Satish, B., & Padmasree, K. (2018). An empirical analysis of herding behaviour in indian stock market. International Journal of Management Studies. https://doi.org/10.18843/ijms/v5i3(3)/15 DOI: https://doi.org/10.18843/ijms/v5i3(3)/15

Shefrin, H., & Statman, M. (2000). Behavioral Portfolio theory Author (s): Hersh Shefrin and Meir Statman Source : The Journal of Financial and Quantitative Analysis, Published by : University of Washington School of Business Administration Stable. Journal of Financial and Quantitative Analysis, 35(2), 127–151. https://doi.org/10.2307/2676187 DOI: https://doi.org/10.2307/2676187

Shiller, R. J. (1990). Market volatility and investor behaviour. The American Economic Review, 80(2), 58–62. https://www.jstor.org/stable/2006543

Shiller, R. J., Black, L., & Jivraj, F. (2020). CAPE and the COVID-19 pandemic effect. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3714737 DOI: https://doi.org/10.2139/ssrn.3714737

Singh, B., Dhall, R., Narang, S., & Rawat, S. (2020). The outbreak of COVID-19 and stock market responses: An event study and panel data analysis for G-20 Countries. Global Business Review. https://doi.org/10.1177/0972150920957274 DOI: https://doi.org/10.1177/0972150920957274

Talwar, M., Talwar, S., Kaur, P., Tripathy, N., & Dhir, A. (2021). Has financial attitude impacted the trading activity of retail investors during the COVID-19 pandemic? Journal of Retailing and Consumer Services, 58, 102341. https://doi.org/10.1016/j. jretconser.2020.102341 DOI: https://doi.org/10.1016/j.jretconser.2020.102341

Tan, L., Chiang, T. C., Mason, J. R., & Nelling, E. (2008). Herding behavior in Chinese stock markets: An examination of A and B shares. Pacific-Basin Finance Journal, 16(1–2), 61–77. https://doi. org/10.1016/j.pacfin.2007.04.004 DOI: https://doi.org/10.1016/j.pacfin.2007.04.004