A Survey in Investor Herding Behavior With Trading Volume Approach in Tehran Stock Exchange

Document Type : Research Paper

Authors

1 Assistant Prof. Faculty of Economic and Management, Semnan University, Semnan, Iran

2 MSc. in Business Management(Finance), Faculty of Economic and Management, Semnan University, Semnan, Iran

Abstract

Herd behavior by investors in capital markets is a behavioral bias that can cause to undesirable effects such as bubble, crash and high fluctuation in stock price. This anomalies can disturb the equilibrium relations in stock market and lead to market inefficiency. Herd behavior is a condition that investors with rational or in rational reasons ignore private information and imitate from others. Many methods and models are provided by researchers to measuring the herd behavior of investors in stock markets. In this article we use Hwang and Salmon and CAPM methods with trading volume approach to measuring the herd behavior. Our study has conducted in a 36 -month period (July 2009 to June 2008) on 146 firms listed in Tehran Stock Exchange. We find evidence of continuous herding in Tehran stock exchange

Keywords

Main Subjects

References

Banerjee, A. (1992). A Simple Model of Herd Behavior. Quarterly Journal of Economics, 107(3): 797 -818.
Bikhchandani, S. & Sharma, S. (2001). Herd Behavior in Financial Markets: A Review. Working Paper, International Monetary Fund. The University of California.
Bikhchandani, S. & Hirshleifer, D.A. & Welch, I. (1992). A Theory of Fads, Fashion, Custom and Cultural Change As Informational Cascades. Journal of Political Economy, 100(5): 992-1026.
Chang, E. & Cheng, J. & Khurana, A. (2000). An Examination of Herd Behavior in Equity Markets: An Empirical Perspective. Working Paper, Georgia Institute of Technology.
Christie, G. & Huang, D. (1995). Following the Pied Piper: Do Individual Returns Herd around the Market? Financial Analysts Journal, 51 (4): 31-37.
Fallahpour, S. & Abdollahi, Gh. (2011). Identification and Weighting the Investor's Behavioral Biases in Tehran Stock Exchange with Fuzzy AHP Approach. Financial Research, 9(31): 99 - 120. (in Persian)
Golarzi, GH. (2010). Analysis the Herd Behavior of Investors in Tehran Stock Exchange Using With State Space Model. PhD Dissertation, Tehran University, Tehran. (in Persian)
Grinblatt, M., Titman, S. & Wermers, R. (1995). Momentum Investment Strategies, Portfolio Performance, and Herding: A Study of Mutual Fund Behavior. American Economic Review, 85(5): 1088-1105.
Hachicha, N. (2010). New Sight of Herding Behavioral through Trading Volume. Discussion Paper, 20: 10 -11.
Hajiyannezhad, A. (2009). Assay The Herding Behavior in Selected Industries in Tehran Stock Exchange During 2001 – 2008. Master Dissertation, Isfahan University, Isfahan. (in Persian)
Hwang, S. & Salmon, M. (2001). A New Measure of Herding and Empirical Evidence. Working Paper. University of London Business School.
Hwang, S. & Salmon, M. (2004).Market stress and herding. Journal of Empirical Finance, 11(4): 585 – 616.
Lakonishok, J., Shleifer, A. & Vishny, W. (1992). The Impact of Institutional Trading on Stock Prices. Journal of Financial Economics, 32 (1): 23- 43.
Nazari, M. & Farzanegan, A. (2011). Periodic Anomalies in Common Stock Return in Tehran Stock Exchange. A Nonparametric Resembling bootstrap method. Financial Research. 9(31):147 -167. (in Persian)
Nofsinger, R. (1996). Tests of Herding and Positive Feedback Trading Strategies By Institutions and Individuals. Washington State University.
Raei, R. & Fallahpour, S. (2004). Behavioral Finance: A Different Approach toward Finance. Financial Research. 6(18): 77-106. (in Persian)
Shahryari, S. (2006). Assay The Investor Herding Behavior With Stock Return Deviation From Market Return During 2001 – 2005 in Tehran Stock Exchange. Master Dissertation, Tehran University, Tehran. (in Persian)
Talangi, A. (2004). The Rational Behavioral Debate in Finance. Financial Research, 6(17): 3-25. (in Persian)
Wang, D. & Canela, M. (2006). Herd Behavior towards the Market Index: Evidence from 21 Financial Markets. Working paper. Available at http://ssrn.com /abstract=1316783. 
Wermers, R. (1995). Herding, Trade Reversals, and Cascading by Institutional Investors. University of Colorado, Boulder.
Financial Research Journal
Volume 16, Issue 2 - Serial Number 2
Autumn & Winter
October 2015
Pages 359-371

Files

Share

How to cite

Statistics