IDEAS home Printed from https://ideas.repec.org/a/ijb/journl/v20y2021i1p1-16.html
   My bibliography  Save this article

Analysis of Sectoral Herding through Quantile Regression: A Study of S&P BSE 500 Stocks

Author

Listed:
  • Vijay Kumar Shrotryia

    (Department of Commerce, Faculty of Commerce and Business, Delhi School of Economics, University of Delhi, India)

  • Himanshi Kalra

    (Department of Commerce, Faculty of Commerce and Business, Delhi School of Economics, University of Delhi, India)

Abstract

The current study empirically investigates sector-wide flock activity for the S&P BSE 500 stocks over 8 years spanning from October 2010 till September 2018. Drawing on absolute deviation model by Chang et al. (2000), the present analysis tends to unravel the curvilinear relationship between consensus return and dispersion via Ordinary Least Squares and Quantile Regression approaches. Using conventional regression, a nonexistent herd hunch is inferred under both normal and asymmetric scenarios. However, the examination of distribution tails discovers herding in auto and engineering sector during bull markets and healthcare sector during bearish conditions. However, the two crises namely the oil crisis of 2014 and the Chinese crash of 2015 subject the Indian bourse to mimicking behavior. This may be a matter of concern for the policy makers as the evidences reflect on the unstable nature of the S&P BSE 500 index and the Indian stock market as a whole. Therefore, the regulatory bodies have to make consistent efforts to bridge the informational distance between various classes of investors and corporate houses to ensure more transparent and honest practices so that investors can make informed and better decisions. Finally, the investors may resort to active trading rules during turbulence to earn more than what market warrants.

Suggested Citation

  • Vijay Kumar Shrotryia & Himanshi Kalra, 2021. "Analysis of Sectoral Herding through Quantile Regression: A Study of S&P BSE 500 Stocks," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 20(1), pages 1-16, June.
  • Handle: RePEc:ijb:journl:v:20:y:2021:i:1:p:1-16
    as

    Download full text from publisher

    File URL: https://ijbe.fcu.edu.tw/assets/ijbe/past_issue/No.20-1/pdf/vol_20-1-1.pdf
    Download Restriction: no

    File URL: https://ijbe.fcu.edu.tw/assets/ijbe/past_issue/No.20-1/abstract/01.html
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Chang, Eric C. & Cheng, Joseph W. & Khorana, Ajay, 2000. "An examination of herd behavior in equity markets: An international perspective," Journal of Banking & Finance, Elsevier, vol. 24(10), pages 1651-1679, October.
    2. Martin T. Bohl & Nicole Branger & Mark Trede, 2015. "The Case of Herding ist Stronger than You Think," CQE Working Papers 3715, Center for Quantitative Economics (CQE), University of Muenster.
    3. Phil Holmes & Vasileios Kallinterakis & M P Leite Ferreira, 2013. "Herding in a Concentrated Market: a Question of Intent," European Financial Management, European Financial Management Association, vol. 19(3), pages 497-520, June.
    4. Chiang, Thomas C. & Zheng, Dazhi, 2010. "An empirical analysis of herd behavior in global stock markets," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1911-1921, August.
    5. Imed Medhioub & Mustapha Chaffai, 2019. "Islamic Finance and Herding Behavior Theory: A Sectoral Analysis for Gulf Islamic Stock Market," IJFS, MDPI, vol. 7(4), pages 1-11, November.
    6. Economou, Fotini & Katsikas, Epameinondas & Vickers, Gregory, 2016. "Testing for herding in the Athens Stock Exchange during the crisis period," Finance Research Letters, Elsevier, vol. 18(C), pages 334-341.
    7. Chiang, Thomas C. & Li, Jiandong & Tan, Lin, 2010. "Empirical investigation of herding behavior in Chinese stock markets: Evidence from quantile regression analysis," Global Finance Journal, Elsevier, vol. 21(1), pages 111-124.
    8. Russ Wermers, 1999. "Mutual Fund Herding and the Impact on Stock Prices," Journal of Finance, American Finance Association, vol. 54(2), pages 581-622, April.
    9. Itzhak Venezia & Amrut Nashikkar & Zur Shapira, 2011. "Firm specific and macro herding by professional and amateur investors and their effects on market volatility," Discussion Paper Series dp586, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    10. Venezia, Itzhak & Nashikkar, Amrut & Shapira, Zur, 2011. "Firm specific and macro herding by professional and amateur investors and their effects on market volatility," Journal of Banking & Finance, Elsevier, vol. 35(7), pages 1599-1609, July.
    11. Lam, Keith S.K. & Qiao, Zhuo, 2015. "Herding and fundamental factors: The Hong Kong experience," Pacific-Basin Finance Journal, Elsevier, vol. 32(C), pages 160-188.
    12. Gębka, Bartosz & Wohar, Mark E., 2013. "International herding: Does it differ across sectors?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 55-84.
    13. Stavros Stavroyiannis & Vassilios Babalos, 2017. "Herding, Faith-Based Investments and the Global Financial Crisis: Empirical Evidence From Static and Dynamic Models," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 18(4), pages 478-489, October.
    14. Spyros Spyrou, 2013. "Herding in financial markets: a review of the literature," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 5(2), pages 175-194, November.
    15. Maria-Miruna Pochea & Angela-Maria Filip & Andreea-Maria Pece, 2017. "Herding Behavior in CEE Stock Markets Under Asymmetric Conditions: A Quantile Regression Analysis," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 18(4), pages 400-416, October.
    16. Yi-Chang Chen & Hung-Che Wu & Jen-Jsung Huang, 2017. "Herd Behavior and Rational Expectations: A Test of China's Market Using Quantile Regression," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 649-663.
    17. Julia Henker & Thomas Henker & Anna Mitsios, 2006. "Do investors herd intraday in Australian equities?," International Journal of Managerial Finance, Emerald Group Publishing, vol. 2(3), pages 196-219, September.
    18. Bekiros, Stelios & Jlassi, Mouna & Lucey, Brian & Naoui, Kamel & Uddin, Gazi Salah, 2017. "Herding behavior, market sentiment and volatility: Will the bubble resume?," The North American Journal of Economics and Finance, Elsevier, vol. 42(C), pages 107-131.
    19. Demirer, RIza & Kutan, Ali M., 2006. "Does herding behavior exist in Chinese stock markets?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(2), pages 123-142, April.
    20. Zheng, Dazhi & Li, Huimin & Chiang, Thomas C., 2017. "Herding within industries: Evidence from Asian stock markets," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 487-509.
    21. Vo, Xuan Vinh & Phan, Dang Bao Anh, 2017. "Further evidence on the herd behavior in Vietnam stock market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 13(C), pages 33-41.
    22. Litimi, Houda & BenSaïda, Ahmed & Bouraoui, Omar, 2016. "Herding and excessive risk in the American stock market: A sectoral analysis," Research in International Business and Finance, Elsevier, vol. 38(C), pages 6-21.
    23. Blake, David & Sarno, Lucio & Zinna, Gabriele, 2017. "The market for lemmings: The herding behavior of pension funds," Journal of Financial Markets, Elsevier, vol. 36(C), pages 17-39.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Puput Tri Komalasari & Marwan Asri & Bernardinus M. Purwanto & Bowo Setiyono, 2022. "Herding behaviour in the capital market: What do we know and what is next?," Management Review Quarterly, Springer, vol. 72(3), pages 745-787, September.
    2. Arjoon, Vaalmikki & Bhatnagar, Chandra Shekhar & Ramlakhan, Prakash, 2020. "Herding in the Singapore stock Exchange," Journal of Economics and Business, Elsevier, vol. 109(C).
    3. Wang, Xinru & Kim, Maria H. & Suardi, Sandy, 2022. "Herding and China's market-wide circuit breaker," Journal of Banking & Finance, Elsevier, vol. 141(C).
    4. Costa, Filipe & Fortuna, Natércia & Lobão, Júlio, 2024. "Herding states and stock market returns," Research in International Business and Finance, Elsevier, vol. 68(C).
    5. Zhao, Yuan & Liu, Nan & Li, Wanpeng, 2022. "Industry herding in crypto assets," International Review of Financial Analysis, Elsevier, vol. 84(C).
    6. Tihana Škrinjarić, 2018. "Revisiting Herding Investment Behavior on the Zagreb Stock Exchange: A Quantile Regression Approach," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 3(2), pages 119-162, December.
    7. Lee, Kyuseok, 2017. "Herd behavior of the overall market: Evidence based on the cross-sectional comovement of returns," The North American Journal of Economics and Finance, Elsevier, vol. 42(C), pages 266-284.
    8. Syed Riaz Mahmood Ali, 2022. "Herding in different states and terms: evidence from the cryptocurrency market," Journal of Asset Management, Palgrave Macmillan, vol. 23(4), pages 322-336, July.
    9. Zhenxi Chen & Jing Ru, 2021. "Herding and capitalization size in the Chinese stock market: a micro-foundation evidence," Empirical Economics, Springer, vol. 60(4), pages 1895-1911, April.
    10. Liu, Tengdong & Zheng, Dazhi & Zheng, Suyan & Lu, Yang, 2023. "Herding in Chinese stock markets: Evidence from the dual-investor-group," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    11. Stavroyiannis, Stavros & Babalos, Vassilios, 2019. "Herding behavior in cryptocurrencies revisited: Novel evidence from a TVP model," Journal of Behavioral and Experimental Finance, Elsevier, vol. 22(C), pages 57-63.
    12. Oi-Ping Chong & A.N. Bany-Ariffin & Annuar Md Nassir & Junaina Muhammad, 2019. "An Empirical Study of Herding Behaviour in China’s A-Share and B-Share Markets: Evidence of Bidirectional Herding Activities," Capital Markets Review, Malaysian Finance Association, vol. 27(2), pages 37-57.
    13. Youssef, Mouna & Mokni, Khaled, 2018. "On the effect of herding behavior on dependence structure between stock markets: Evidence from GCC countries," Journal of Behavioral and Experimental Finance, Elsevier, vol. 20(C), pages 52-63.
    14. BenSaïda, Ahmed, 2017. "Herding effect on idiosyncratic volatility in U.S. industries," Finance Research Letters, Elsevier, vol. 23(C), pages 121-132.
    15. Yi-Chang Chen & Hung-Che Wu & Jen-Jsung Huang, 2017. "Herd Behavior and Rational Expectations: A Test of China's Market Using Quantile Regression," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 649-663.
    16. Chang, Chia-Lin & McAleer, Michael & Wang, Yu-Ann, 2020. "Herding behaviour in energy stock markets during the Global Financial Crisis, SARS, and ongoing COVID-19," Renewable and Sustainable Energy Reviews, Elsevier, vol. 134(C).
    17. Nguyen, Huu Manh & Bakry, Walid & Vuong, Thi Huong Giang, 2023. "COVID-19 pandemic and herd behavior: Evidence from a frontier market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 38(C).
    18. Guney, Yilmaz & Kallinterakis, Vasileios & Komba, Gabriel, 2017. "Herding in frontier markets: Evidence from African stock exchanges," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 47(C), pages 152-175.
    19. Coskun, Esra Alp & Lau, Chi Keung Marco & Kahyaoglu, Hakan, 2020. "Uncertainty and herding behavior: evidence from cryptocurrencies," Research in International Business and Finance, Elsevier, vol. 54(C).
    20. Xolani Sibande & Rangan Gupta & Riza Demirer & Elie Bouri, 2023. "Investor Sentiment and (Anti) Herding in the Currency Market: Evidence from Twitter Feed Data," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 24(1), pages 56-72, January.

    More about this item

    Keywords

    Herding; Ordinary Least Squares; Quantile Regression; Indian Stock Market;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • G1 - Financial Economics - - General Financial Markets
    • G4 - Financial Economics - - Behavioral Finance
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ijb:journl:v:20:y:2021:i:1:p:1-16. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Szu-Hsien Ho (email available below). General contact details of provider: https://edirc.repec.org/data/cbfcutw.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.