Do Market Liquidity, Gold and Oil Prices Drive Herding? Sectoral Insights from the Indian Stock Market

This study examines the impact of market liquidity, gold prices, and oil prices on investor herding behaviour across sectors in the Indian stock market from 2006 to 2023. The Cross-Sectional Absolute Deviation model, developed by Chang et al. (2000, Journal of Banking & Finance, 24 (10), 1651–1679) and Ordinary Least Squares regression have been used to identify herding behaviour among investors in the Indian stock market. The empirical findings revealed that anti-herding and herding behaviour exhibit significant influence in different sectors throughout the entire study period. The empirical results revealed significant influences of market liquidity, oil, and gold prices on investors’ herding behaviour in the stock market. The study offers a framework for promoting more informed and independent decision-making, thereby reducing herd behaviour that contributes to market volatility and the formation of asset bubbles. The findings may also assist policymakers and regulators in implementing essential measures to enhance market stability and curb speculative excesses.