Does Regime-Dependent Volatility Drive Dynamism in Investor Herding?
The existing literature on herding often uses the static model to test herd behaviour in the Indian market context. Hence, the objective of this paper is to investigate the dynamic herd behaviour for S&P BSE 500 from 2009-2023 using the Markov Regime Switching model. Results exhibit the occurren...
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Faculty of Management & Finance, University of Colombo
2024-06-01
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| Series: | Colombo Business Journal |
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| Online Access: | https://mgmt.cmb.ac.lk/cbj/wp-content/uploads/2024/07/3.-CBJ-2023-FIN-3-V15I1-Regime-Dependent-Volatility.pdf |
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| author | Komal Jindal Meera Bamba Mamta Aggarwal |
| author_facet | Komal Jindal Meera Bamba Mamta Aggarwal |
| author_sort | Komal Jindal |
| collection | DOAJ |
| description | The existing literature on herding often uses the static model to test herd behaviour in the Indian market context. Hence, the objective of this paper is to investigate the dynamic herd behaviour for S&P BSE 500 from 2009-2023 using the Markov Regime Switching model. Results exhibit the occurrence of three regimes, namely, high, low, and extremely volatile regimes. Findings suggest that the Indian market moves into the order of low, high, and extreme volatility (LHC), similar to other developed countries. This has implications for investors to either exit from the market or reframe their portfolio through hedging techniques before the market enters into extreme volatility. Moreover, the results exhibit anti-herding in high and low-volatile regimes. Our study discloses the presence of herding in crashes or extremely volatile regimes, showing that Indian investors start following each other during crash-like situations. This research is significant for individual investors, portfolio managers, and stock market regulators. |
| format | Article |
| id | doaj-art-eb8ed12a6bc542d890a30e3d820a4389 |
| institution | Kabale University |
| issn | 1800-363X 2579-2210 |
| language | English |
| publishDate | 2024-06-01 |
| publisher | Faculty of Management & Finance, University of Colombo |
| record_format | Article |
| series | Colombo Business Journal |
| spelling | doaj-art-eb8ed12a6bc542d890a30e3d820a43892025-01-04T07:46:12ZengFaculty of Management & Finance, University of ColomboColombo Business Journal1800-363X2579-22102024-06-01151547910.4038/cbj.v15i1.169Does Regime-Dependent Volatility Drive Dynamism in Investor Herding?Komal Jindal 0https://orcid.org/0000-0001-9544-2722Meera Bamba1Mamta Aggarwal2Department of Commerce, Indira Gandhi University, IndiaDepartment of Commerce, Chaudhary Bansi Lal University, IndiaDepartment of Commerce, Indira Gandhi University, IndiaThe existing literature on herding often uses the static model to test herd behaviour in the Indian market context. Hence, the objective of this paper is to investigate the dynamic herd behaviour for S&P BSE 500 from 2009-2023 using the Markov Regime Switching model. Results exhibit the occurrence of three regimes, namely, high, low, and extremely volatile regimes. Findings suggest that the Indian market moves into the order of low, high, and extreme volatility (LHC), similar to other developed countries. This has implications for investors to either exit from the market or reframe their portfolio through hedging techniques before the market enters into extreme volatility. Moreover, the results exhibit anti-herding in high and low-volatile regimes. Our study discloses the presence of herding in crashes or extremely volatile regimes, showing that Indian investors start following each other during crash-like situations. This research is significant for individual investors, portfolio managers, and stock market regulators.https://mgmt.cmb.ac.lk/cbj/wp-content/uploads/2024/07/3.-CBJ-2023-FIN-3-V15I1-Regime-Dependent-Volatility.pdfdynamic herdingindian equity marketthree regime-switching modelvolatility regime |
| spellingShingle | Komal Jindal Meera Bamba Mamta Aggarwal Does Regime-Dependent Volatility Drive Dynamism in Investor Herding? Colombo Business Journal dynamic herding indian equity market three regime-switching model volatility regime |
| title | Does Regime-Dependent Volatility Drive Dynamism in Investor Herding? |
| title_full | Does Regime-Dependent Volatility Drive Dynamism in Investor Herding? |
| title_fullStr | Does Regime-Dependent Volatility Drive Dynamism in Investor Herding? |
| title_full_unstemmed | Does Regime-Dependent Volatility Drive Dynamism in Investor Herding? |
| title_short | Does Regime-Dependent Volatility Drive Dynamism in Investor Herding? |
| title_sort | does regime dependent volatility drive dynamism in investor herding |
| topic | dynamic herding indian equity market three regime-switching model volatility regime |
| url | https://mgmt.cmb.ac.lk/cbj/wp-content/uploads/2024/07/3.-CBJ-2023-FIN-3-V15I1-Regime-Dependent-Volatility.pdf |
| work_keys_str_mv | AT komaljindal doesregimedependentvolatilitydrivedynamismininvestorherding AT meerabamba doesregimedependentvolatilitydrivedynamismininvestorherding AT mamtaaggarwal doesregimedependentvolatilitydrivedynamismininvestorherding |