The Lahore Journal
of Business

The Lahore Journal
of Business

Lahore Journal of Business

(HEC recognized journal in “Y” category)

The Lahore Journal of Business is aimed at providing a specialized forum for dissemination of qualitative and quantitative research in various areas of business administration. The LJB invites researchers, policy makers and analysts to submit original theoretical and empirical papers that explore and contribute to the understanding of various areas in the business domain. The Journal aims at bringing together state-of-art research findings, particularly from emerging markets, in various business disciplines including (but not limited to) accounting, banking, management, marketing, finance, investments, human resource management and organizational behavior.

Safi Ullah Khan and Muhammad Faisal Rizwan

Employing stock price data from a developing market, we examine whether investors’ trading patterns are characterized as herd behavior at the market and industry levels. Unlike results for some developing markets, linear models of herd behavior find no evidence of herd formation, in any of the sectors, during periods of large market movements. However, non-linear models find significant nonlinear herding behavior only for two sectors of the whole sample, and when we group the sub-samples based on up and down market movements. Overall, empirical results tend to support the notion of no herd formation in Pakistan’s market. Two main explanations may be offered for the results: first, a developing market, characterized by thin trading and low turnover, with few of the stocks from various sectors actively traded in the market. Second, individual investors that dominate Pakistan’s equity market and low levels of institutional investor’s presence preclude herd formations.