Market Wide Herding and Its Impact on Stock Market
Essay by people • August 23, 2011 • Essay • 299 Words (2 Pages) • 1,993 Views
Market wide herding and its impact on stock market
The paper tries to identify the presence of 'market-wide herding' in the Indian
capital market and whether Institutional Investors impact such Herding.
In particular, the paper looks at the impact of FII Flows as well as mutual funds on
herding. The work also looks at the the impact of index return and volatility on
herding.
The Indian economy embarked on a process of liberalisation in 1992 and since
then the Indian capital markets have been on a process of integration with the global
markets. Over the last decade, India has attracted investments from Foreign
Institutional Investors (FIIs) from across the world, the initial trickle ballooning into a
torrent. Fund mobilisation by domestic institutional investors like Mutual Funds (MFs)
has been increasing in view of the increasing rate. Like any other developing
economy, the Indian capital markets have welcomed institutional investors as they
provide the much-needed liquidity for the markets; however, the increased role of
the institutional investor, particularly the FII has also lead to a rise in negative
perceptions about their impact on the markets. The issue of stability of the financial
markets thus gained prominence.
The Indian economy embarked on a process of liberalisation in 1992 and since
then the Indian capital markets have been on a process of integration with the global
markets. Over the last decade, India has attracted investments from Foreign
Institutional Investors (FIIs) from across the world, the initial trickle ballooning into a
torrent. Fund mobilisation by domestic institutional investors like Mutual Funds (MFs)
has been increasing in view of the increasing rate. Like any other developing
economy, the Indian capital markets have welcomed institutional investors as they
provide the much-needed liquidity for the markets; however, the increased role of
the institutional investor, particularly the FII has also lead to a rise in negative
perceptions
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