The herding behaviour on Pakistan stock exchange – using firm-level data

This paper analyses herding behaviour in the Pakistan stockexchange (PSX, formerly known as Karachi stock exchange, KSE) for a sampleof 663 firms over a period of 13 years, from 2004 to 2017. For detectingherding behaviour, two dependent variables are used, i.e., cross-sectionalstandard deviation (CSSD) of Christie and Huang (1995) and cross-sectionalabsolute deviation (CSAD) of Chang et al. (2000). The results show no herdingbehaviour on the basis of both methods at different levels of marketmovements. The absence of the herding behaviour may be because these firmsbelong to different sectors which may follow their respective industryportfolios but not the overall market; for example, Shah et al. (2017)documented that firms in several industries herd toward their industryportfolios for Pakistani data. Future research can be done using a primary datacollection method from investors about their opinion on herding behaviour