HERDING BEHAVIOR IN EMERGING AND DEVELOPED MARKETS: EVIDENCE FROM INDIA AND THE UNITED STATES DURING THE COVID-19 CRISIS

Abstract

Purpose – This study investigates the presence of herding behavior in India and the U.S. during the COVID-19 crisis, offering comparative evidence from an emerging and a developed market during a period of global financial stress.

Methodology/approach – The analysis uses daily, weekly and monthly closing price  data of individual stock from the BSE 500 and S&P 500 markets during the COVID-19 period and employs the CSAD and CSSD frameworks of Christie and Huang (1995) and Chang et al. (2000) to detect herding during periods of intense market movements.

Findings – The analysis shows that herding is present only in the U.S. stock market during extreme upward movements in both daily and weekly data, while no significant herding behavior is observed in the Indian market during the COVID-19 period.

Implications – The presence of herding only in the U.S. market during extreme upswings indicates greater synchronized trading under stress, while India shows more diverse investor behavior. These results highlight the need for market regulators in both countries to closely monitor investor behavior during periods of heightened uncertainty to ensure stability, protect retail participants, and strengthen market resilience during future crises.