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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
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    References listed on IDEAS

    as
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    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

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