Herding Phenomenon During Various Market Conditions

Abstract

This paper examines the presence of the herding phenomenon in the South African market between January 2011 and December 2019. The novel contribution of this paper is to investigate if there is an asymmetric herding phenomenon during three market conditions associated to market returns, trading volume and volatility in the market. Using the CSAD measure, we provide no evidence of the herding phenomenon in the South African market. Also we report no evidence of this phenomenon during increasing and decreasing market; during days with low trading volumes and during days with high and low volatility in the market. However, we find evidence of a weak herding phenomenon during days with high trading volumes. More specifically, the herding parameter is negative and statistically at ten percent level. These findings are eminent for investors and regulators to improve their comprehension of the South African market and the investor behavior. This research can also help investors to conceive their trading strategies during various market conditions.