South Asian Journal of Management

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An Assessment of the Mimicking Tendency of Investors in an Indian Benchmark Index


Affiliations
1 Department of Accounting and Finance, Charlton College of Business, University of Massachusetts Dartmouth, MA 02747, United States
2 Department of Commerce & Management Studies, St. Mary’s College, Kuppadi P.O., Sulthan Bathery, Wayanad 673592, India
3 Department of International Business, School of Management, Pondicherry University, R. V. Nagar, Kalapet, Puducherry 605014, India
     

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Investment decisions may be taken after a detailed fundamental and technical analysis or through mental shortcuts. Some play a smarter role by mimicking other’s investment pattern on the assumption that others are better in taking investment decisions. This mimicking behavior is called herding. Many previous studies have already proved how much damage herding behavior can cause on stock markets by driving prices away from fundamentals and creating volatility. The present study focuses on market herding in Indian equity market by considering National Stock Exchange (Nifty) 50 index during the period from April 1, 2005 to March 31, 2015 by using Christie and Huang (CH) model, Chang et al. (CCK) model and HS (Hwang and Salmon) model. This is the first study in Indian scenario that takes into consideration all the three models in quarterly, yearly and whole period analysis. The study concludes that Indian stock market is generally free from herding behavior except during short periods, which could be attributed to shocks such as financial crisis and economic setbacks. The implications of these developments in the financial sector, has been the period of study, which is a decade of post-liberalization in Indian economy, and hence this study provides a good insight into the health of Indian stock market.

Keywords

Herding Behavior, Christie and Huang (CH) Model, Chang et al. (CCK) Model, Hwang and Salmon (HS) Model and Nifty 50.
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  • An Assessment of the Mimicking Tendency of Investors in an Indian Benchmark Index

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Authors

G. Naresh
Department of Accounting and Finance, Charlton College of Business, University of Massachusetts Dartmouth, MA 02747, United States
R. Ganesh
Department of Commerce & Management Studies, St. Mary’s College, Kuppadi P.O., Sulthan Bathery, Wayanad 673592, India
S. Thiyagarajan
Department of International Business, School of Management, Pondicherry University, R. V. Nagar, Kalapet, Puducherry 605014, India

Abstract


Investment decisions may be taken after a detailed fundamental and technical analysis or through mental shortcuts. Some play a smarter role by mimicking other’s investment pattern on the assumption that others are better in taking investment decisions. This mimicking behavior is called herding. Many previous studies have already proved how much damage herding behavior can cause on stock markets by driving prices away from fundamentals and creating volatility. The present study focuses on market herding in Indian equity market by considering National Stock Exchange (Nifty) 50 index during the period from April 1, 2005 to March 31, 2015 by using Christie and Huang (CH) model, Chang et al. (CCK) model and HS (Hwang and Salmon) model. This is the first study in Indian scenario that takes into consideration all the three models in quarterly, yearly and whole period analysis. The study concludes that Indian stock market is generally free from herding behavior except during short periods, which could be attributed to shocks such as financial crisis and economic setbacks. The implications of these developments in the financial sector, has been the period of study, which is a decade of post-liberalization in Indian economy, and hence this study provides a good insight into the health of Indian stock market.

Keywords


Herding Behavior, Christie and Huang (CH) Model, Chang et al. (CCK) Model, Hwang and Salmon (HS) Model and Nifty 50.

References