Comparative Analysis of Intentional Herding Behavior in Tehran Stock Exchange and Emerging Markets

The efficient markets hypothesis has always been one of the most widely criticized theories in the financial literature in recent years on the basis that investors may exhibit irrational and predictable biases mainly attributed to psychological factors. This paper examines one of these biases; Intentional herding. Herding studies in the world mainly are on the basis of cross-sectional deviation of returns and a regression between it and the market return. Because of the obvious weaknesses of this method, this research presents another approach which uses the comparison instead. In addition to Tehran Stock Exchange, and by the assistance of an artificially created market free of herding effects which is the comparison of 27 international indices, we examined intentional herding in Korea and Spain markets and after that we compared the level of this behavior in Iran, Spain and Korea.