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Detecting the Herding Behaviour in the South African Stock Market and its Implications

Author

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  • Samuel Tabot Enow

    (Research Associate, The IIE Vega School, South Africa.)

Abstract

Herd mentality is associated with financial market bubbles and crises and is not a new concept. Despite the dotcom bubble in the late 90 s and the recent real estate bubble, investors still have the tendency to see irrational decision as rational. Thus the aim of this study was to investigate the presence of herding in the Johannesburg stock exchange during the Covid-19 pandemic. Studies conducted in other markets have detected the presence of herding which sends strong signal of issues that may arise in financial markets. Using a sample period from 02 January 2020 to 31 December 2021 and a cross sectional absolute deviation as an analysis tool, the findings reveals a significant presence of herding in the Johannesburg stock exchange. The main implications to this finding is that momentum investing strategies is more suitable for the Johannesburg Stock exchange and exploring past price movements may provide valuable insights on expected future price movements

Suggested Citation

  • Samuel Tabot Enow, 2023. "Detecting the Herding Behaviour in the South African Stock Market and its Implications," International Journal of Economics and Financial Issues, International Journal of Economics and Financial Issues, vol. 13(2), pages 88-92, March.
    • Handle: RePEc:eco:journ1:2023-02-10
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    References listed on IDEAS

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    Cited by:

    1. Samuel Tabot Enow, 2025. "The intertemporal relationship between downside risks and expected stock returns: Evidence from time-varying transition probability models," International Journal of Business Ecosystem & Strategy (2687-2293), Bussecon International Academy, vol. 7(2), pages 319-323, April.
    2. Samuel Tabot Enow, 2025. "Exploring stochastic volatility in financial market," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 14(1), pages 74-79, January.
    3. Samuel Tabot Enow, 2025. "Capital structure and a firm´s profitability: is there any relationship?," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 14(2), pages 164-172, March.
    4. Thato Malefane & Fabian Moodley & Sune Ferreira-Schenk, 2026. "The effect of herding behaviour on JSE returns: A comparative analysis of before and during COVID-19," International Journal of Business Ecosystem & Strategy (2687-2293), Bussecon International Academy, vol. 8(2), pages 213-225, April.
    5. Samuel Tabot Enow, 2025. "Multivariate Granger causality between financial markets: Evidence from US, Europe, Asia and Emerging market," International Journal of Business Ecosystem & Strategy (2687-2293), Bussecon International Academy, vol. 7(2), pages 270-275, April.

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    Keywords

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    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G4 - Financial Economics - - Behavioral Finance

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