Herding Behavior Analysis in the Stock Exchange of Thailand

Abstract

     This paper examined herding behavior in the Stock Exchange of Thailand (SET) in order to guide development of the SET. The study could also be beneficial to the decision making process of investors in the SET. An analysis of daily closing industrial sector price data for 22 sectors from 2 January 1990 to 30 December 2010, found evidence of herding behavior in the SET. The finance and securities sector was a source of herding behavior in the SET that influenced the dispersion of returns in other industrial sectors. This behavior existed in both up and down markets; nevertheless, herding behavior often appeared in a rising market more than in a down market. Furthermore, after including the impact of Thailand’s financial crisis, it was found that this event explained herding behavior in the SET. However, the USA’s financial crisis had no influence on herding behavior in the SET.