HERDING MEASURES IN EQUITY MARKETS: A CASE STUDY OF BURSA MALAYSIA

Abstract

This study examines the issue of herding in the Malaysian equity market over the period 1993 – 2004. Using the method proposed by Christie and Huang (1995), we did not detect any evidence of herding for the whole market, the large firms or the small firms during the pre-crisis, crisis and the post-crisis periods. The modified method of Christie and Huang (1995) produced similar findings. However, using the method proposed by Chang et al. (2000), herding was found in the overall market in the whole period. In the pre-crisis period, herding in the market during the market decline could be attributed to both the large and small firms. Rather surprisingly, there was no herding in the crisis period. In the post-crisis period, herding was detected in the market during market rise and this could be attributed to the small firms. Large firms, on the other hand, witnessed herding during market decline. The modified method of Chang et al. (2000) detected more evidence of herding with the use of cross-sectional inter-quartile range but lessevidence of herding when cross-sectional standard deviation is used.