Is there Herding Behavior in the Indonesia Stock Market during the COVID-19 Pandemic?

Elsa Viona; Fitri Santi; Berto Usman; Dewi Rahmayanti

doi:10.56225/jmsc.v2i1.172

Authors

Elsa Viona Department of Management, Faculty of Economic and Business, University of Bengkulu, Muara Bangka Hulu, Sumatera, 38371 Bengkulu, Indonesia
Fitri Santi Department of Management, Faculty of Economic and Business, University of Bengkulu, Muara Bangka Hulu, Sumatera, 38371 Bengkulu, Indonesia
Berto Usman Department of Management, Faculty of Economic and Business, University of Bengkulu, Muara Bangka Hulu, Sumatera, 38371 Bengkulu, Indonesia
Dewi Rahmayanti Department of Management, Faculty of Economic and Business, University of Bengkulu, Muara Bangka Hulu, Sumatera, 38371 Bengkulu, Indonesia

DOI:

https://doi.org/10.56225/jmsc.v2i1.172

Keywords:

herding behavior, cross-sectional absolute deviation (CSAD), rolling regression, COVID-19, sectoral stock Indexes

Abstract

This study investigates the signs of herding behavior during the COVID-19 pandemic in the Indonesian Stock Exchange. Various studies found no herding in Indonesian stock markets during the COVID-19 pandemic, but we believe those studies have a limited methodology to capture the herding behavior. We believe that herding appears in a short time during the pandemic period, so we have to reexamine the existence of herding behavior using sectoral stock indexes rather than the stock market-wide index (IHSG) and using the rolling regression technique to capture the possibilities of herding that might be existing during short window period in COVID-19 pandemic time. This study uses a model Chang et al. suggested (2000). Variables such as return dispersion (CSAD), absolute market return, and market squared return are employed in the analysis. We use the closing price of 715 stocks, nine sectoral stock indexes in IDX, and the closing price of IHSG from January 2, 2020, until April 30, 2021. The results show that herding cannot be found in the full sample of the market-wide stock index (IHSG) and sectoral indexes. The rolling regression indicates that herding was found for several days from January 2020 to December 2021.

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