Herding behaviour in Indian equity market: a quantile regression approach

Abstract

This study examines the presence of herding behaviour in the Indian equity market using average daily data from BSE-500 Index stocks for January 2000 to December 2018. The study employs model developed by Chang et al. (2000) using cross sectional absolute deviation of return dispersion as a measure of herding behaviour. The empirical results of OLS regression reveal absence of herding behaviour for pre, during and post crisis period in normal market return and the asymmetric market condition. Similarly, no evidence of herding behaviour is found by examining trading volume and volatility. Further, robustness checked by applying non-parametric techniques of quantile regression, the result remains consistent with OLS findings. Overall, herding behaviour does not prevail in the Indian equity market. The outcome of increased return dispersion may be due to the efficient micro information in the Indian equity market.