COVID-19 EFFECT ON HERDING BEHAVIOUR IN INDIAN CAPITAL MARKET

Abstract

This study aims to test whether the pandemic of COVID-19 has an effect on herding behaviour
on the Indian capital market. Using the data on a daily basis and using Cross-Sectional Absolute
Deviation (CSAD) Approach for a sample of the Bombay stock exchange (BSE) and National
stock exchange (NSE), for the period from November 2015, to November 2020 (1246 daily
data). The results reveal a non-linear link between the cross-sectional absolute deviation of
stock returns and the market portfolio return. This decreases the dispersion with the rise in the
market rates of return, which means that investors emulated market performance during the
study period without paying attention to stock risk and return characteristics, suggesting that
the pandemic COVID-19 increases herding behaviour in the capital markets of India.