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Research Article Open access CC BY 4.0

Herding Behaviour in Investment Decision Making: A Review

Palak Dewan, Khushdeep Dharni

Journal of Economics, Management and Trade · pp. 1–12 · Published 27 Jun 2019

10.9734/jemt/2019/v24i230160

Abstract

Herding denotes how individuals act together in a group without any centralized direction. Herding is widely studied as it drives asset prices away from the fundamental value and there are concerns it leads to volatility, destabilizes the market and increases the fragility of the financial market. In this paper, a concise review of the literature of herding is provided.  Various types of herding, its significance and occurrences along with the determinants are discussed. Various approaches used for measuring herding have been reviewed.  The relationship of herding along with other variables such as market conditions, volatility, and liquidity is reviewed and studied. For the purpose of drafting the review paper, 79 papers for over three decades have been consulted.  Further, future research directions are included for the benefit of the academicians, researchers and policymakers.

Herding behaviour financial market volatility liquidity behavioural biases

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