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Do investors herd in emerging economies? Evidence from the Indian equity market

Aleem Ansari (Business Management, GLA Institute of Business Management, Mathura, India)
Valeed Ahmad Ansari (Business Administration, Faculty of Management Studies and Research, Aligarh Muslim University, Aligarh, India)

Managerial Finance

ISSN: 0307-4358

Article publication date: 15 February 2021

Issue publication date: 29 June 2021




The purpose of this study is to empirically examine the presence of herding behavior of Indian investors using daily sample data drawn from the Standard and Poor's (S&P) Bombay Stock Exchange-500 Index over the period 2007–2018.


The study employs the model proposed by Chang et al. (2000), taking stock return dispersion as a measure to capture herding. The empirical results demonstrate the absence of herding behavior in all market states, that is, normal, up and down market conditions for the overall period.


Contrastingly, the study found negative herding behavior, which underlines that individuals are taking the decision away from the market consensus. The subperiod analysis corroborates the negative herding behavior. The results remain invariant across large, mid and small-capitalization firms except in one year, that is, 2009 for small firms. While using liquidity and sentiment as variables to examine herding, the study finds some evidence of herding behavior for high market liquidity state and sentiment. The findings of negative herding shed new light on herding behavior in the Indian stock market.


This pattern of behavior may indicate irrationality of investor behavior and the presence of noise traders who mistrust market-wide information. Behavioral factors such as overconfidence may explain this pattern of behavior.



Ansari, A. and Ansari, V.A. (2021), "Do investors herd in emerging economies? Evidence from the Indian equity market", Managerial Finance, Vol. 47 No. 7, pp. 951-974.



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