TITLE:
Herding Behavior in Futures Market: An Empirical Analysis from India
AUTHORS:
Ameet Kumar Banerjee, Purna Chandra Padhan
KEYWORDS:
Herding Behavior, Cross-Sectional Dispersion, Futures, Generalized Least Square
JOURNAL NAME:
Theoretical Economics Letters,
Vol.7 No.4,
June
22,
2017
ABSTRACT: This study tries to explore the existence of herding
behavior of investors in an entirely new asset class, futures, in Indian
futures market. For empirical analysis, it uses data of exchanged traded equity
futures contracts, a part of futures and options segment of National Stock
Exchange (NSE, India) from January 2011 to June 2016. Applying generalized
least squares (GLS) regression model, the study found supporting evidences for
existence of herd behavior for the study period, especially during
macroeconomic news releases, in periods of extremely low (high) trading volume and spillovers from other
markets. This analysis of herd behavior is key in understanding the bandwagon
effect of investors, which results in inefficient asset pricing. As a policy
implication, it is highly relevant to regulatory institutions responsible for
efficient functioning of the financial system.