The Herding Behavior of Investors in the Indian Financial Market

Abstract

The study explores the phenomenon of herding behavior among investors in the Indian financial market with a specific focus on the influence of social media. Herding bias impacts the cognitive functions of the investor by inducing them to take decisions based on the decisions of the crowd. Social media platforms have gained significant popularity, becoming a prominent source of financial information and market sentiment for investors. The study analyses the impact based on the social media messages, news, and discussions on popular platforms. A sample of 215 investors was collected through a questionnaire via Google Form. The respondents were selected through purposive sampling technique. The hypothesis is primarily tested using PLS-SEM. The results of this study indicate that influencer credibility for the investors shows a significant positive impact on herd behaviour. Financial literacy had a detrimental effect on herding but became significant when risk perception was used as a mediator. Lastly, risk perception in isolation also showed a significant impact on herding behaviour.