Herding Behavior and The Impact of Global Stock Market

• Main Authors: , Anggi Mayang Sari, , Mahfud Sholihin, M.Acc., Ph.D.
• Format: Theses and Dissertations NonPeerReviewed
• Published: [Yogyakarta] : Universitas Gadjah Mada 2013
• Subjects: ETD
• Online Access: https://repository.ugm.ac.id/118237/; http://etd.ugm.ac.id/index.php?mod=penelitian_detail&sub=PenelitianDetail&act=view&typ=html&buku_id=58181
• Institution: Universitas Gadjah Mada

Classical finance assumes that investors in stock market are rational and will efficiently respond to new information of stock market. However, empirical studies reveal that market is not efficient as explained by efficient market hypothesis of classical finance theories. Therefore, in order to overcome those lackness of classical finance approach, behavioral finance was established. In this study, behavioral finance approach is used to examine herding existence in Indonesia and the impact of Global Stock Market toward herding in Indonesia. This research aims are to investigate the existence of herding behavior in Indonesia Stock Market (IDX), to investigate the existence of herding behavior in Global Stock Market, and to investigate the impact of Global Stock Market toward herding in Indonesia. The periods of research are six years, from 2006 until 2011. In this research, the samples are divided into three groups, LQ-45, Non LQ-45, and Global Stock Market. Total samples for LQ-45 are 14 stocks while Non LQ-45 counts for 82 samples. Samples for Global Stock Market also counts for 14 stocks. In order to investigate the presence of herding behavior, researcher use CSAD (Cross Sectional Absolute Deviations) method. The research result stated that herding behavior does exist in LQ-45 and Non LQ-45 at market stress condition. In line with herding occurrence in Indonesia, herding behavior does exist in Global Stock Market, especially in market stress condition. Moreover, there is significant effect between herding occurrence in Global Stock Market toward herding occurrence in Indonesia.