Influence of Price Volatility on Herding Behaviour: A Study of Nigerian Stock Market

Abstract

Price volatility in the stock market could lead to irrational behaviour of investors which might tantamount result into herding behaviour. This study evaluated the influence of price volatility on herding behaviour in Nigerian stock market with focus on Consumer goods, Financial services, Health care and Industrial goods sectors. Monthly data of stock prices for fifteen years from 2001 – 2015 were used and 97 companies' stocks from the four sectors were considered. OLS model was used to determine the existence and extent of herding behaviour in these sectors. The results showed that price volatility had influence on herding behaviour, but there was no evidence of herding noticed in any of the sectors, except Financial services sector which was not statistically significant. The study recommended that NSE should make information available to all market participants in order to boost their confidence in making investment decisions.

Keywords: Herding behavior; Price volatility; Nigerian Stock Market; Stock price

DOI: 10.7176/RJFA/10-10-09

Publication date:May 31^st 2019