Covid-19 induced herding: a case of sectoral indices of the Indian stock market

Abstract

Herding tendencies are likely to be more prominent during the crisis period. The Covid 19 outbreak has been nothing less than a crisis for the world. Assuming the possibility of Covid-19 induced herding among investors, this study attempts to examine the behaviour in the Indian stock market (S&P BSE) by analyzing the daily returns data of 10 indices and the S&P BSE Sensex using the CSAD model from January 01, 2015 to December 31, 2020, by dividing the period into three sets: whole period, pre Covid-19 outbreak period and during Covid-19 outbreak period. The complete analysis is done for three different states of the markets (general – overall market condition, bullish and bearish). The study finds the Indian stock market to experience sector specific herding behavior during Covid 19 period under the study, in general, as well as during bullish and bearish trends.