Explaining the Herd Behavior Model and Return in Tehran Stock Exchange

Abstract

This study explains a model for herding behavior in Tehran Stock Exchange. Also in this study, the impact of returns on herding behavior is examined. Using transactional data herding behavior in Tehran Stock Exchange (in the time periods 480 360 240 120 seconds) was measured and analyzed, and the number and incidence of this behavior routine transactions were identified. In this study, Cipriani & Guarino model was used for offering behavioral patterns based on market microstructure. Considering of informative value of news as a parameter in market microstructure is the advantage of proposed model. Analyzing data showed the evidence of herd behavioral for all trading days and the most moments of trading. Also herd behavior in sale transactions is more than buying shares. The relationship between the behavior and performance of companies based on logistic regression models were analyzed at various time intervals and found that company return is associated herding behavior.

Keywords

• herd behavorial model
• market microstructure
• tranasaction data
• return