HERDING BEHAVIOR IN THE CHINESE AND INDIAN MARKETS

by Rohit Sagar on Tuesday 25 January 2011, 12:33 PM | Category: Campus Articles| View: 1287 views
 
 
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JIMS ROHINI SEC-5 ORGANIZES INTERNATIONAL GUEST LECTURE(DELHI)
By Dr. HARMINDER SINGH, Senior lecturer Deakin University, (Australia)
JIMS Rohini Sec-5 New Delhi on 21/01/11 organized a guest lecture on the vital topic of HERDING BEHAVIOR IN THE CHINESE AND INDIAN MARKETS conducted by Dr. HARMINDER SINGH, Senior lecturer Deakin University, Australia. Speaker threw light on what is herding behavior- Individuals who suppress their own beliefs and base their investment decisions solely on the collective actions of the market, even when they disagree with its prediction (Christie and Hwang, 1995). As per the analyses by various economic luminaries viz. Nofsinger and Sias(1999), Lihara, Kato and Tokunaga(2001), Caparrelli, D'Arcangelis and Cassuto(2004)  , Demirer and Kutan (2005), Mason and Nelling (2007) results imply that the herding behavior is more pronounced in the Chinese market than in the Indian market. Director-general of JIM's sec-5, Dr. R P Maheshwari also paid audience at the occasion.
 Director of the institute Dr. J K Goyal too added to the learning of the students by asking certain meaningful & contextual questions which the guest lecturer answered to everyone's satisfaction. He further took the gathering through some of the test activities undertaken by the aforementioned stalwarts suggesting that herding behaviour is more severe during extreme downward market & indicating the existence of herding behaviour during extreme positive market in the Indian market. Other research work indicated that in BSE herding behaviour do not exist when the market is falling heavily and also that in the Indian market herding behavior exists in extreme up market condition but not in extreme down market condition. Their scrutiny also found that the herding behaviors are more severe when the market is falling in the Chinese market however in BSE 500 suggesting that the herding behavior occurs only during up market. Further analyses hinted that:
• In the Chinese stock market, herding behavior exists only in high volume state
In the Indian market, herding behavior is not related to the level of trading volume
• In the Chinese stock market, during the whole sample period, strong herding behavior shown in all three groups.
The findings suggest that herding behaviour in India is as a result of the herding on middle-sized stocks. The findings are also in line with those above that herding behavior only exists when the market is climbing up
• Herding behavior is more significant during the period of global financial crisis in both markets
Based on the overall observation speaker arrived at the following conclusion:
       The result suggests that herding behaviour exists in both Chinese and Indian stock market
        Herding in the Chinese stock market is more pronounced than that in the Indian stock market
        The herding behaviour is more significant during extreme market conditions in both the markets
        Higher herding behaviour is found when the market is falling in the Chinese stock market. In the Indian market, there is the presence of the herding behaviour only during the up market
       The level of herding is greater when the trading volume is high in the Chinese market. In contrast, the level of herding behaviour in the Indian market is unrelated to the size of trading volume
        The magnitude of the herding behaviour in each stock market seems to be affected by the size of the stocks in each stock market and negative effects of the global financial crisis
        More open market and higher ratio of institutional investors may contribute to the less significant herding behaviour in the Indian market
       Foreign and institutional investors are more rational and educated and less likely to herd
       Future research should separate the herding behaviour between individual and institutional investors
 
 
 
 
 
 
 
 
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