The study aims to determine whether market conditions motivate individual investors to engage in herd behavior from 2013 to 2023 for the Saudi stock capital as an emerging market. To achieve this goal, the study used the cross-sectional absolute mean–median difference as the proxy for herd behavior and as the dependent variable, market returns as the independent variable. In addition, the study used descriptive statistics to describe the study variables and the least square regression models to test the study's hypotheses. The overall results for the entire study period found that individual investors exercised irrational herd behavior. However, the yearly analysis showed mixed results, as the individual investors exercised herd behavior extensively in some years, less intensively in some years, and did not excise herd behavior at all in some other years. In addition, herd behavior during up-market conditions is twice as much as herd behavior under down-market conditions, indicating that individual investors do not follow institutional investors' decisions. Instead, they depend on their information. The study results have implications for several stakeholders, such as investors and regulatory bodies in the Saudi capital market.
Salah Ahmed Oraby (Tue,) studied this question.