Abstract
Indonesia Stock Exchange provides Islamic stocks for Muslim investors who want toinvest, with the first Islamic stock index in Indonesia being Jakarta Islamic Index or JIIthat consists of thirty of the most liquid Islamic stocks. The market capitalization of JIItends to increase every year. This paper examines the presence of herding behavior inemerging Islamic stock market of Indonesia using daily return of Indonesia CompositeIndex and JII from October 6, 2000 to October 5, 2018. Herding behavior could generallytrigger shifting market prices from equilibrium values. Herding behavior may beidentified from the relation between stock return dispersion and market return. Stockreturn dispersion is measured using Cross Sectional Absolute Deviation or CSAD.Generalized Auto Regressive Conditional Heteroskedasticity or GARCH method isused to detect herding behavior. GARCH does not see heteroskedasticity as a problem,instead uses it to make a model. The result indicates that herding behavior exist inIslamic stock market of Indonesia. Asymmetric herding occurs in Indonesia Islamicstock market where herding behavior exists during falling market condition only.
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