A Critical Review on Herding Behaviour of Investors in Financial Market: A look on Indian perspective

Abstract

— The behavioural and cognitive factors of the investors influenced the decision-making process of
an investor. Herding behaviour tends investors to mimic the collective actions of others while making
investment decisions. Herding occurs when group consensus is thought to carry better and more useful
information than an individual's logic. The investors’ cognitive biases and psychological errors will indulge
in misvaluation, high volatility, and panic trading in the securities market, resulting in the loss of capital
from global sources and the capital for seekers of funds within the economy. Much research has been
conducted on herding mentality in developed markets, but in India, a few studies have been conducted to
date.
This paper tries to present an overview of the concept of herding behaviour. Further, it also attempts to
critically review the studies of herding behaviour in the Indian financial market. The study undertakes a
detailed review of major empirical studies conducted on the Indian capital market from 2009 to 2019.