Herding behaviour In Indian and Chinese Market | Guest Lecture in JIMS India

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Herding Behavior in the Chinese and


Indian Markets:
Guest Lecture in JIMS India

JIMS Rohini Sec-5 New Delhi organized a guest lecture on HERDING BEHAVIOR IN
THE CHINESE AND INDIAN MARKETS conducted by Dr. HARMINDER SINGH, Senior
lecturer Deakin University, Australia. Speaker threw light on herding behavior

Urbtech India
Urbtech India Developers (P) Ltd.
12/27/2010



Herding Behavior in the Chinese and Indian Markets: Guest Lecture in
JIMS India
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
herding behavior
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.
When does it exist in Indian and Chinese Market?
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”
Conclusion
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