Do Investors Herd Intraday in the Australian Equities Market?

Abstract

Herding among investors is a popular behavioral explanation for the excess variability and short-term trends observed in financial markets. Most empirical studies, however, fail to find evidence of herding in spite of testing a variety of theoretical models. One excuse for this failure is the coarse data frequencies employed. Using a high frequency intraday dataset from the Australian equities market, we find little evidence for market-wide or industry sector herding. Even in extreme market conditions, participants appear to discriminate between different securities, as predicted by the rational asset pricing paradigm.

Keywords: Herding, behavioral finance, excess volatility

JEL Classification: G12, G14