Does herding behavior matter in investment management and perceived market efficiency? Evidence from an emerging market

Maqsood Ahmad, Qiang Wu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

4 Citations (Scopus)


Purpose: This article aims to clarify the mechanism by which herding behavior influences perceived market efficiency, investment decisions and the performance of individual investors actively trading on the Pakistan Stock Exchange (PSX). Design/methodology/approach: The deductive approach was used in this study, as the research is based on the theoretical framework of behavioral finance. A questionnaire and cross-sectional design were employed to collect data from the sample of 309 investors trading on the PSX. The collected data were analyzed using SPSS and AMOS graphics software. Hypotheses were tested using structural equation modeling (SEM). Findings: The article provides further empirical insights into the relationship between herding behavior and investment management and perceived market efficiency. The results suggest that herding behavior has a markedly negative influence on perceived market efficiency and investment performance, while positively influencing the decision-making of individual investors. Originality/value: The current study is the first to focus on links between herding behavior and investment management activities and perceived market efficiency. This article enhances the understanding of the role that herding behavior plays in investment management and, more importantly, it improves understanding of behavioral aspects and their influence on investment decision-making in an emerging market. It also adds to the literature in the area of behavioral finance, specifically the role of herding behavior in investment management; this field is in its initial stage, even in developed countries, while little work has been done in developing countries.

Original languageEnglish
Pages (from-to)2148-2173
Number of pages26
JournalManagement Decision
Issue number8
Publication statusPublished - 8 Aug 2022


  • Herding behavior
  • Investment decision-making
  • Investment performance
  • Perceived market efficiency

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Management Science and Operations Research


Dive into the research topics of 'Does herding behavior matter in investment management and perceived market efficiency? Evidence from an emerging market'. Together they form a unique fingerprint.

Cite this