Herding behavior in the Indonesian Stock Exchange: the roles and contributions of foreign investors during the period 2006 to 2011
Domestic investors in the Indonesian capital market (IDX) tend to be very dependent on the behavior of foreign investors. It is assumed that most of the domestic investors in the IDX are like this, caused by an axiom that the bargaining position of foreign investors is stronger than that of the do...
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Penerbit Universiti Kebangsaan Malaysia
2016
|
| Online Access: | http://journalarticle.ukm.my/10803/ http://journalarticle.ukm.my/10803/ http://journalarticle.ukm.my/10803/1/8947-43011-1-PB.pdf |
| Summary: | Domestic investors in the Indonesian capital market (IDX) tend to be very dependent on the behavior of foreign investors.
It is assumed that most of the domestic investors in the IDX are like this, caused by an axiom that the bargaining
position of foreign investors is stronger than that of the domestic investors and those of other emerging markets. This
study tries to investigate whether the herding behavior exists and whether the assumption that foreign investors have
caused instability is true or just a myth during the period 2006-2011.There are three objectives of the study: 1) To
prove whether the conduct of domestic investors’ herding behavior in the IDX exists, 2) To prove whether the trading of
foreign investors causes the herding behavior and 3) To prove whether the interaction between foreign and domestic
investors affect the stock volatility. Using the data from 2006 to 2011, it is found that herding behavior in the IDX
exists; moreover, by using VAR analysis, it also indicates that the occurrence of herding behavior is caused by negative
feedback trading from foreign investors. The volatility analysis using Parkinson and Garman-Klass methods found
the stock volatilities in the IDX increased, caused by the interaction of foreign and domestic investors. |
|---|