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FIIs herding in energy sector of Indian stock market

FIIs herding in energy sector of Indian stock market This paper investigates herding behavior and its persistence among foreign institutional investors (FIIs) in the individual stocks of the energy sector of Indian stock exchange by focusing on post turmoil period. The study also examines the relation of herding with the individual return, market return, trading volume and conditional volatility of individual and market return.Design/methodology/approachThe presence of herding is investigated by Lakonishok et al. (1992) model, value-based and count-based herd ratio measure among FIIs in individual stock of energy sector post turmoil period. Further, run test was employed to check the persistency in herding and multivariate distributed lag to investigate the relationship with the market determinant.FindingsThe result indicates the existence of herding in most of the companies and strong persistence in all the companies. The intensity of buy side herding is higher than sell side. Herding and individual return both are significant driving forces of FIIs herding, while trading volume and market volatility in few companies exhibit inverse relationship.Research limitations/implicationsThis study is limited to investigation of energy sector stock.Social implicationsStock market is significantly influenced by FIIs and their propensity to herd may generate instability in the stock market. Therefore, regulatory authority should continuously monitor the flow of fund by FIIs.Originality/valueHerding in the individual stock of the energy sector was not previously performed. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png South Asian Journal of Business Studies Emerald Publishing

FIIs herding in energy sector of Indian stock market

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2398-628X
DOI
10.1108/sajbs-02-2020-0033
Publisher site
See Article on Publisher Site

Abstract

This paper investigates herding behavior and its persistence among foreign institutional investors (FIIs) in the individual stocks of the energy sector of Indian stock exchange by focusing on post turmoil period. The study also examines the relation of herding with the individual return, market return, trading volume and conditional volatility of individual and market return.Design/methodology/approachThe presence of herding is investigated by Lakonishok et al. (1992) model, value-based and count-based herd ratio measure among FIIs in individual stock of energy sector post turmoil period. Further, run test was employed to check the persistency in herding and multivariate distributed lag to investigate the relationship with the market determinant.FindingsThe result indicates the existence of herding in most of the companies and strong persistence in all the companies. The intensity of buy side herding is higher than sell side. Herding and individual return both are significant driving forces of FIIs herding, while trading volume and market volatility in few companies exhibit inverse relationship.Research limitations/implicationsThis study is limited to investigation of energy sector stock.Social implicationsStock market is significantly influenced by FIIs and their propensity to herd may generate instability in the stock market. Therefore, regulatory authority should continuously monitor the flow of fund by FIIs.Originality/valueHerding in the individual stock of the energy sector was not previously performed.

Journal

South Asian Journal of Business StudiesEmerald Publishing

Published: Apr 15, 2022

Keywords: Herding behavior; Foreign institutional investors; Behavioral finance; LSV model; Energy sector; Indian stock market

References