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Herding behaviour and investor's sentiment: evidence from the Chinese Stock Market

Author

Listed:
  • Nait Bouzid Khalil
  • Rabiai Sara
  • Inariten Soraya
  • Bakri Widad

Abstract

Using monthly data, this study analyses the effect of investors' sentiment on herding behaviour. This study uses C.I.C.S.I Index as a proxy of investors' sentiment in the Chinese Stock Market. The finding provides no empirical evidence of the existence of herding propensity in the Chinese Stock Market covering the whole period from 2003 to 2018 and overall sub-periods including pre-financial crisis (BFC), during financial crisis (FC), and post-financial crisis (AFC), which is consistent with the idea that herding behaviour is a short-lived phenomenon (Christie and Huang, 1995). However, when conditioning herding on investors sentiment, herding intensity is more evidenced within the Chinese A-shares market, where individual investors are the major traders, implying that herding within the Chinese A-shares market is a long-lived phenomenon. Finally, this study documents that herding exists in the Chinese Stock Market and varies with levels of investors' sentiment, market trends and sub-periods. Furthermore, the finding provides supplementary evidence that the level of investors' sentiment is a significant aspect in identifying different herding trends among individual investors.

Suggested Citation

  • Nait Bouzid Khalil & Rabiai Sara & Inariten Soraya & Bakri Widad, 2023. "Herding behaviour and investor's sentiment: evidence from the Chinese Stock Market," International Journal of Behavioural Accounting and Finance, Inderscience Enterprises Ltd, vol. 7(1), pages 55-85.
    • Handle: RePEc:ids:ijbeaf:v:7:y:2023:i:1:p:55-85
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