The Relationship between Investors Herding and Volatility (Evidence from Tehran Stock Exchange)

Abstract

This study examines the effect of Herding in different states (low, high and extreme volatility) in Tehran Stock Exchange during the years 2009-2013 using Chang et al. (2000) and Balcilar et al. (2013) models. In this survey, herding is tested under 3 market regimes. The results don't show evidence of herding in the market using a static model (Chang et al., 2000). So the dynamic model (Balcilar et al., 2013) was used to analyze Herding under 3 regimes in which our results support the presence of herding under 2 market regimes (high and extreme). The results also don’t demonstrate evidence of herding behavior under the low volatility regime.