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Stock Characteristics and Individual Herding: A Causal-Comparative Study

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  • Tze Sun Wong

    (Walden University, Minneapolis, USA)

Abstract

Individuals who invest stocks in a market with excess volatility generally end up selling or holding the stocks at losses. The purpose of this study was to examine individual herding as it related to three comprehensible stock characteristics, market capitalization, price-to-book ratio, and industry affiliation. The target population was the individual investors who traded in Taiwan Stock Exchange in 2016. Data were collected through subscription. Based on Lakonishok, Shleifer, and Vishny's measure, individual herding was significant. The three stock characteristics were separately and as a whole related to individual herding. The findings confirmed sell-herding higher than buy-herding, more serious herding in high market capitalization stocks, and broad industry herding. The findings also extended knowledge to comparable herding levels with 8 to 10 years ago, more linearity between log market capitalization and log odds of herd occurrence, and less herding in P/B ratio stocks with other independent variables controlled.

Suggested Citation

  • Tze Sun Wong, 2020. "Stock Characteristics and Individual Herding: A Causal-Comparative Study," International Journal of Applied Behavioral Economics (IJABE), IGI Global, vol. 9(4), pages 58-73, October.
    • Handle: RePEc:igg:jabe00:v:9:y:2020:i:4:p:58-73
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