Effect of Herding Behaviour on Stock Price Movements at Nairobi Securities Exchange

Patrick M Ngumi, Khatibu G. M. Kazungu, Felician Mutasa
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Abstract

Purpose: Empirical evidence shows that herding pattern is experienced at NSE which is linked to particular periods.   Methodology: We observe the kind of herding characterised by changes in the stock market parameters which includes number of deals, average price, total purchases among other market parameters are as a result of unique circumstances as opposed to the overall market. Findings: Further, results of both CSSD and CSAD indicated that herding has an effect on prices of shares and stocks. Idiosyncratic herding phenomenon detected can either be reduced or eliminated from portfolios through different diversifications strategies which are meant to reduce the levels of exposure to risk by merging various investment like bonds, real estates, stocks among others which are all not likely to be moving towards the same direction. Further, by encouraging diversification, also herding behaviour would be decreased by the simple fact that assets cannot move in the same direction at the same time and rate. Unique Contribution to Theory, Practice and Policy: It is also recommended that the government should try to privatize some of its enterprises to enhance public participation in an effort to stabilise stock prices. This should be accompanied by alliances with exchange securities. The policy makers need further to consider forecasting the financial instability and thus regulate herding patterns in advance.
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羊群行为对内罗毕证券交易所股票价格变动的影响
目的:经验证据表明,NSE经历了与特定时期相关的羊群模式。方法:我们观察到一种以股票市场参数变化为特征的羊群现象,这些参数包括交易数量、平均价格、总购买量以及其他市场参数,这些都是与整体市场相反的独特环境的结果。此外,CSSD和CSAD的结果都表明羊群效应对股票和股票价格有影响。通过不同的多元化策略,可以减少或消除投资组合中的特殊羊群现象,这些策略旨在通过合并债券,房地产,股票等各种投资来降低风险暴露水平,这些投资都不太可能朝着同一个方向发展。此外,通过鼓励多样化,羊群行为也会减少,因为资产不可能在同一时间以同一速度向同一方向移动。对理论、实践和政策的独特贡献:还建议政府应尝试将部分企业私有化,以增强公众参与,以稳定股价。这应该伴随着与交易所证券的结盟。决策者需要进一步考虑预测金融不稳定,从而提前调节羊群模式。
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