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Investor Behaviour and Herding: Evidence from the National Stock Exchange in India

Author

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  • Sunil Poshakwale

    (Sunil Poshakwale (corresponding author), School of Management, Cranfield University, Bedford-MK43 0AL, England. E-mail: sunil.poshakwale@cranfield.ac.uk)

  • Anandadeep Mandal

    (Anandadeep Mandal, School of Management, Cranfield University, Bedford-MK43 0AL, England. E-mail: anandadeep.mandal@cranfield.ac.uk)

Abstract

The article examines the presence of herd behaviour in the emerging Indian stock market. Using daily data of S&P CNX Nifty 50 index of the National Stock Exchange over 1997–2012 and by employing Kalman filter, we investigate for the presence of herding. The article finds that the investors in the Indian market show significant herding behaviour. The presence of herding is robust after accounting for time-varying state variables that capture market volatility and market direction. Herding shows significant movements and persistence in both bull and bear markets and it seems to increase in bear market conditions. JEL Classification: C02, C21, G11, G14

Suggested Citation

  • Sunil Poshakwale & Anandadeep Mandal, 2014. "Investor Behaviour and Herding: Evidence from the National Stock Exchange in India," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 13(2), pages 197-216, August.
    • Handle: RePEc:sae:emffin:v:13:y:2014:i:2:p:197-216
    DOI: 10.1177/0972652714541341
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    References listed on IDEAS

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    1. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
    2. Sunil Poshakwale & Chandra Thapa, 2009. "The impact of foreign equity investment flows on global linkages of the Asian emerging equity markets," Applied Financial Economics, Taylor & Francis Journals, vol. 19(22), pages 1787-1802.
    3. repec:zbw:bofitp:2001_010 is not listed on IDEAS
    4. Vasileios Kallinterakis & Tatyana Kratunova, 2007. "Does thin Trading Impact Upon the Measurement of Herding? Evidence from Bulgaria," Ekonomia, Cyprus Economic Society and University of Cyprus, vol. 10(1), pages 42-65, Summer.
    5. Grinblatt, Mark & Titman, Sheridan & Wermers, Russ, 1995. "Momentum Investment Strategies, Portfolio Performance, and Herding: A Study of Mutual Fund Behavior," American Economic Review, American Economic Association, vol. 85(5), pages 1088-1105, December.
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    Cited by:

    1. Indārs, Edgars Rihards & Savin, Aliaksei & Lublóy, Ágnes, 2019. "Herding behaviour in an emerging market: Evidence from the Moscow Exchange," Emerging Markets Review, Elsevier, vol. 38(C), pages 468-487.

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    More about this item

    Keywords

    Herd behaviour; emerging market; cross-sectional standard deviation; Kalman filter;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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