Herding and Positive Feedback Trading in American Stock Market: A Two Co-directional Behavior of Investors


  •  Malek Belhoula    
  •  Kamel Naoui    

Abstract

Using aggregate data from DJIA since 1987, this paper attempts to address two potential co-directional
behaviors of investors: Herding and positive feedback trading. These behavioral patterns bear interesting
implications for market price as they may lead to excess volatility and mispricing. To empirically test for herding
behavior, we employ two econometric techniques: the Cross Sectional Standard Deviation (CSSD) and the cross
sectional absolute standard deviation (CSAD), while we employ the model formally introduced by Sentana and
Wadhwani (1992) to empirically test for positive feedback trading. Our results support the joint significant
presence of herding and positive feedback trading behaviors during periods of relatively large market price
movements.



This work is licensed under a Creative Commons Attribution 4.0 License.
  • ISSN(Print): 1833-3850
  • ISSN(Online): 1833-8119
  • Started: 2006
  • Frequency: bimonthly

Journal Metrics

IJBM's citation performance is tracked through publicly available scholarly metrics. According to Google Scholar Citations (latest available snapshot):

  • h-index: 176
  • i10-index: 1322

These metrics reflect citations indexed by Google Scholar and are provided for transparency. The journal is not currently indexed in Web of Science or Scopus.

Index

Contact