Herding behavior from loss aversion effect in the stock exchange of thailand

Abstract

© 2021, The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG. This paper investigates the effect of loss aversion behavior, by adapting the loss aversion utility function of Berkelaar et al.[3], and taking into account the US-China trade war, on the herding behavior in the Stock Exchange of Thailand. It used the daily data from 01/04/2010 to 05/31/2019 for estimation using Ordinary Least Squares and Quantile Regression. The results did not report the herding behavior in the Stock Exchange of Thailand in both upward and downward trends of the market. The testing of the effect of loss aversion bias on herding behavior revealed the loss aversion to have effect on the herding behavior in some industries when the returns are high. Furthermore, the US-China trade war has a bearing herding behavior in some industries.