Investigating and Testing the Herding Behaviour of Investors in Stock Exchange

Subject Areas : مدیریت

Rahele Yousefi ¹ , Abolfazl Shahrabadi ²

1 - Faculty of Accounting and Management, Islamic Azad University of Qazvin
2 - Islamic Azad University of Zanjan

Received: 2009-04-10 Accepted : 2009-05-19 Published : 2009-09-06

Keywords: Behavioral finance, Herding behavior, Sentiments,

Abstract :

Herding behavior is considered as one of the behavioral approaches between investors and an important element in financial markets. Sometimes, this element causes agitation in circumstances where information is spread. A crucial problem in this regard is distinguishing between artificial and thoughtful herds, because thoughtful herding may be inefficient and it may eventually result in fluctuation in markets. In this research, we examined and tested the herding behavior between investors in Tehran Security Exchange using Salmon and Huang’s model. In order to calculate the required variables of model, the moving window technique was utilized and the window size was set as 24 months. In other words, by applying the information of the last 24 months, Excel Software calculated monthly market yields as well as monthly yield of each share and the required variables. After substituting the obtained values for the variables in standardized formula HS, we calculated and analyzed the herding amounts for each months of 1382-86 interval .The findings depicted a clear herding pattern for the time interval under study and hence, confirmed the corresponding theory.