Industry herding behaviour in Indian stock market

Abstract

Investors mimicking the investment pattern of other investors are called herding. Studies have already shown that herding is not a profitable investment strategy and could even be damaging for both investors and stock markets. Hence herding continues to be an active topic of study the world over. Understanding the herding behaviour in the market will be effective when investors have a diversified portfolio, but may not hold good when their portfolio consist of similar stocks. This emphasises the importance of studying herding in industry-wise stocks traded in Indian market. The present study employs the Christie and Huang model and Chang, Cheng and Khoruna model to trace out the presence of industry herding behaviour in Nifty 50 index during the period 1st April 2005 to 31st March 2015. The findings of the study showed that overall Indian stock market is not influenced by industry herding behaviour.