SPURIOUS & INTENTIONAL HERDING BEHAVIOR IN PAKISTAN STOCK EXCHANGE

Zhu Zhaohui, School of Accounting, Zhejiang Gongshang University, China
Fayyaz Ali, School of Accounting, Zhejiang Gongshang University, China
Zhang Lu-guang, School of Accounting, Zhejiang Gongshang University, China

Published in

JOURNAL OF INTERNATIONAL FINANCE AND ECONOMICS
Volume 19, Issue 2, p35-54, June 2019

ABSTRACT

The purpose of this paper is to investigate the trading strategy of stock market investors to exhibit herding behavior and then decompose it into spurious and intentional herding behavior under different market conditions. Empirically we used the Christie and Huang (1995) model on daily market prices for the Pakistan Stock Exchange (PSX) for the period 2009 to 2016. Specifically for financial year 2016, all stocks are ranked on their B/M (MV) ratio and are assigned to a High B/M (High MV) sub-sample to create a portfolio of ‘‘value’’ (large) stocks and a Low B/M (Low MV) to create a portfolio of ‘‘growth’’ (small) stocks. Results showed no presence of herding behavior in all Indexes so herding is neither spurious nor intentional. For 2016 portfolios, herding behavior is present and it is intentional (True herding). Coming towards sector wise results, herding is present only in Leasing companies and it is intentional herding. The results suggested that the herding behavior is intentional in Pakistan Stock Exchange.

Keywords

Herding behavior, spurious and intentional, small and large stocks, high and low market capitalization.


About the Article

Abstract, Keywords, Page Numbers, etc

About the Journal

Managing Editors, Indexing, Best Practices

About The Publisher

History, Partners, Conferences

Access the Full Article

Log-in to IABE to access full article

Search IABE

Search IABE's articles by Title, Author, or keyword

Contact Us

Send a message to IABE