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Behavioral Biases and Market Fluctuations: An Empirical Study of Herding and Volatility in Vietnam

Author

Listed:
  • Thanh Pham

    (Finance and Banking Faculty, VNU University of Economics and Business, Hanoi, Vietnam)

  • Huyen Thu Nguyen

    (Greenwich Vietnam, FPT University, Hanoi, Vietnam)

  • Thanh Trung Le

    (Finance and Banking Faculty, VNU University of Economics and Business, Hanoi, Vietnam)

Abstract

[Purpose] This research assesses the intensity and presence of the herding behavior in the Vietnamese stock market and its influence on the trading activity and price volatility. Given the dominance of retail investors and limited market transparency, the study examines how collective investor sentiment impacts volatility before, during, and after the COVID-19 pandemic. [Design/methodology/approach] Using intraday transaction data from the Ho Chi Minh Stock Exchange (HOSE) between March 2019 and January 2025, the herding intensity is assessed through Patterson and Sharma’s (2006) run-based statistic. The GARCH(1,1) approach is utilized to explore how herding and trading volume influence market volatility, with the dataset divided into three sub-periods: pre-COVID, during COVID, and post-COVID. Stationarity and approach robustness are confirmed by utilizing the Augmented Dickey-Fuller (ADF) test. [Findings] The results confirm statistically strong herding behavior, particularly during the COVID‑19 period, as both buyer (Hu) and seller (Hd) herding intensities frequently fall below the −1.96 threshold (p

Suggested Citation

  • Thanh Pham & Huyen Thu Nguyen & Thanh Trung Le, 2026. "Behavioral Biases and Market Fluctuations: An Empirical Study of Herding and Volatility in Vietnam," Advances in Decision Sciences, Asia University, Taiwan, vol. 30(3), pages 27-62, September.
    • Handle: RePEc:aag:wpaper:v:30:y:2026:i:3:p:27-62
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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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