The COVID-19 Pandemic And Herding Behavior: Evidence From Vietnam Stock Market

Abstract

This research investigates the herding behavior of the sectoral indices of Ho Chi Minh stock exchange (HOSE). The novel contribution of this research lies in its examination of herding behavior throughout the entire period, as well as the periods before, during and after the outbreak of the COVID-19 pandemic. To analyze herd formation, the author utilized the widely used model introduced by Chang et al. (2000). The dataset used in this study consists of daily stock closing prices for a total of 229 firms, which collectively represent the 10 industry indices. The data spans from 1 January 2016 to December 2022. The results for the whole sample, peak outbreak and after COVID-19 provide existence of herding behavior in all sectors. During the peak outbreak, the consumer (CONS) and healthcare (HEAL) sectors clearly show strong herding behavior. However, before COVID-19, all sectors except for the utilities (UTI) sector did not display statistically significant herding tendencies. In addition, during bull and bear conditions, the author finds evidence of herding behavior before and during the COVID-19 pandemic. The research enables investors to develop effective trading strategies within the context of the COVID-19 pandemic.