Herding Behavior in Stock Market of Bangladesh: A Case of Behavioural Finance

Abstract

The study investigates herding behavior in the stock market of Bangladesh using a measure called Cross-Sectional Absolute Deviation (CSAD). The findings suggest that herding behavior does exist in the stock market of Bangladesh, based on the analysis of daily data from 169 stocks listed on the Dhaka Stock Exchange (DSE). Furthermore, the study indicates the presence of potential asymmetries in herd behavior concerning market returns and trading volume. The herding behavior, as observed in the Bangladeshi stocks, exhibits asymmetric tendencies, implying that the strength of herding varies depending on different market conditions. Specifically, the results show that herding behavior is more pronounced when the market trading volume is high. In other words, when there is an increased trading activity in the market, the tendency for investors to engage in herding behavior becomes stronger.