IDEAS home Printed from https://ideas.repec.org/p/gtr/gatrjs/jfbr222.html
   My bibliography  Save this paper

Insights into Herding Behavior in Indonesian Islamic Banks

Author

Listed:
  • Weni Susanti

    (Universitas Tridinanti Palembang, Indonesia Author-2-Name: Kamaludin Author-2-Workplace-Name: "Universitas Bengkulu, Indonesia " Author-3-Name: Berto Usman Author-3-Workplace-Name: "Universitas Bengkulu, Indonesia " Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)

Abstract

" Objective - This study investigates the phenomenon of herding behavior among investors in Indonesia's Shariah banks. In this situation, market participants tend to follow prevailing market trends without engaging in comprehensive fundamental analysis. Methodology/Technique – Specifically, the research examines the influence of investors' religious understanding as a mediating variable on their decision-making processes within the Shariah financial sector. Notably, the study addresses whether investors are more inclined to mimic market movements or rely on independent analysis when investing in Sharia-compliant banks. It is commonly observed that rumors can precipitate rash trading decisions among investors, leading to the buying or selling of shares even in the absence of substantial changes in asset fundamentals (Bommel, 2003). Findings – Employing a quantitative approach, this study utilizes path analysis to explore the impact of religious understanding on herding behavior. Although prior research has extensively investigated herding behavior, the introduction of religious understanding as a mediating variable offers a new dimension to assess the correlation between religiosity and market behavior. This aspect has not been widely examined in previous segmentations. The sample comprises data from 15 Islamic Banks in Indonesia, analyzed using associative data analysis techniques with AMOS software. Findings indicate significant positive relationships between stock returns and herding behavior, trading volume and herding behavior, and the level of Islamic understanding and herding behavior in these banks. Novelty – However, these relationships do not hold when Islamic understanding is applied as a mediating variable. This suggests that the level of religious understanding acts as a direct influencer rather than a mediator in herding behavior among investors in Indonesian Islamic banks. Type of Paper - Empirical"

Suggested Citation

  • Weni Susanti, 2024. "Insights into Herding Behavior in Indonesian Islamic Banks ," GATR Journals jfbr222, Global Academy of Training and Research (GATR) Enterprise.
    • Handle: RePEc:gtr:gatrjs:jfbr222
    DOI: https://doi.org/10.35609/jfbr.2024.9.1(1)
    as

    Download full text from publisher

    File URL: http://gatrenterprise.com/GATRJournals/JFBR/pdf_files/JFBR-Vol-9(1)/1.Weni%20Susanti.pdf
    Download Restriction: http://gatrenterprise.com/GATRJournals/online_submission.html
    File URL: https://libkey.io/https://doi.org/10.35609/jfbr.2024.9.1(1)?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lakonishok, Josef & Shleifer, Andrei & Vishny, Robert W., 1992. "The impact of institutional trading on stock prices," Journal of Financial Economics, Elsevier, vol. 32(1), pages 23-43, August.
    2. Dieter Nautz, "undated". "Herding in financial markets: Bridging the gap between theory and evidence," BDPEMS Working Papers 2013002, Berlin School of Economics.
    3. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    4. Froot, Kenneth A & Scharftstein, David S & Stein, Jeremy C, 1992. "Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation," Journal of Finance, American Finance Association, vol. 47(4), pages 1461-1484, September.
    5. B. W. Ang & Ki-Hong Choi, 1997. "Decomposition of Aggregate Energy and Gas Emission Intensities for Industry: A Refined Divisia Index Method," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 59-73.
    6. Hsieh, Shu-Fan, 2013. "Individual and institutional herding and the impact on stock returns: Evidence from Taiwan stock market," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 175-188.
    7. John R. Nofsinger & Richard W. Sias, 1999. "Herding and Feedback Trading by Institutional and Individual Investors," Journal of Finance, American Finance Association, vol. 54(6), pages 2263-2295, December.
    8. Sam Wylie, 2005. "Fund Manager Herding: A Test of the Accuracy of Empirical Results Using U.K. Data," The Journal of Business, University of Chicago Press, vol. 78(1), pages 381-403, January.
    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. Ashish Kumar Garg & Subrata Kumar Mitra & Dilip Kumar, 2016. "Do foreign institutional investors herd in emerging markets? A study of individual stocks," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 43(3), pages 281-300, September.
    2. 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.
    3. Kapil Choudhary & Parminder Singh & Amit Soni, 2022. "Relationship Between FIIs’ Herding and Returns in the Indian Equity Market: Further Empirical Evidence," Global Business Review, International Management Institute, vol. 23(1), pages 137-155, February.
    4. Itzhak Venezia, 2018. "Lecture Notes in Behavioral Finance," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 10751, October.
    5. Fotini Economou & Konstantinos Gavriilidis & Bartosz Gebka & Vasileios Kallinterakis, 2022. "Feedback trading: a review of theory and empirical evidence," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 15(4), pages 429-476, February.
    6. Pegah Dehghani & Ros Zam Zam Sapian, 2014. "Sectoral herding behavior in the aftermarket of Malaysian IPOs," Venture Capital, Taylor & Francis Journals, vol. 16(3), pages 227-246, July.
    7. Thomas, Ashok & Spataro, Luca & Mathew, Nanditha, 2014. "Pension funds and stock market volatility: An empirical analysis of OECD countries," Journal of Financial Stability, Elsevier, vol. 11(C), pages 92-103.
    8. I. Koetsier & J.A. Bikker, 2017. "Herding behaviour of Dutch pension funds in sovereign bond investments," Working Papers 17-15, Utrecht School of Economics.
    9. Imran Yousaf & Shoaib Ali & Syed Zulfiqar Ali Shah, 2018. "Herding behavior in Ramadan and financial crises: the case of the Pakistani stock market," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 4(1), pages 1-14, December.
    10. 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.
    11. Deng, Xin & Hung, Shengmin & Qiao, Zheng, 2018. "Mutual fund herding and stock price crashes," Journal of Banking & Finance, Elsevier, vol. 94(C), pages 166-184.
    12. Galariotis, Emilios C. & Krokida, Styliani-Iris & Spyrou, Spyros I., 2016. "Bond market investor herding: Evidence from the European financial crisis," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 367-375.
    13. Moatemri Ouarda & Abdelfatteh El Bouri & Olivero Bernard, 2013. "Herding Behavior under Markets Condition: Empirical Evidence on the European Financial Markets," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 214-228.
    14. Hao Fang & Yang-Cheng Lu & Hwey-Yun Yau, 2014. "The Effects of Stock Characteristics on the Direction and Extent of Herding by Foreign Institutional Investors in the Taiwan Stock Exchange," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(S2), pages 60-74.
    15. Uchida, Hirofumi & Nakagawa, Ryuichi, 2007. "Herd behavior in the Japanese loan market: Evidence from bank panel data," Journal of Financial Intermediation, Elsevier, vol. 16(4), pages 555-583, October.
    16. Charteris, Ailie & Kallinterakis, Vasileios, 2021. "Feedback trading in retail-dominated assets: Evidence from the gold bullion coin market," International Review of Financial Analysis, Elsevier, vol. 75(C).
    17. I. Koetsier & J.A. Bikker, 2018. "Herding behavior of Dutch pension funds in asset class investments," Working Papers 18-04, Utrecht School of Economics.
    18. I. Koetsier & J.A. Bikker, 2017. "Herding behaviour of Dutch pension funds in sovereign bond investments," Working Papers 17-15, Utrecht School of Economics.
    19. Sumit Agarwal & I‐Ming Chiu & Chunlin Liu & S. Ghon Rhee, 2011. "The Brokerage Firm Effect In Herding: Evidence From Indonesia," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 34(3), pages 461-479, September.
    20. 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.

    More about this item

    Keywords

    Herding behavior; Stock returns; Trading volume; Level of Understanding of Islam.;
    All these keywords.

    JEL classification:

    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:gtr:gatrjs:jfbr222. 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: Prof. Dr. Abd Rahim Mohamad (email available below). General contact details of provider: http://gatrenterprise.com .

    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.