Wednesdays obtain herd immunity? Examining the effect of the day of the week on the NSE sectoral market during COVID-19

ABSTRACT

A modified CSAD model is utilised in this research to detect herding in the developing market prior to and during the COVID-19 epidemic. From July 2019 through June 2021, we evaluate the outcomes of the NSE's twelve sectoral indices. We find considerable intentional herding before to the outbreak of COVID-19, but anti-herding after the pandemic on Wednesday. Herding is enhanced on Mondays after COVID-19 outbreak but decreases on the other days of the week. This study suggests that the COVID-19 pandemic may have impaired investors’ capacity to discriminate between signals, leading their investments in sectoral indices to be connected at random rather than distinguishing between signals to follow the market leader for larger returns.

KEYWORDS:

• COVID-19
• efficient markets
• emerging markets
• herding
• market-microstructures

JEL CLASSIFICATION:

• G02
• G12
• G14
• G15

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Chauhan et al. (2020) discuss how herding behaviour influences the stock return generation process. They discovered significant herd in large cap stocks but none in less volatile small cap stocks in their research, which they ascribe to the lower number of transactions in small cap equities.

2 Balcilar et al. (2013) use a three-state Markov-witching model to show the investor's variable herding behaviour in three market stages in GCC countries: low volatility, crash volatility, and high volatility. Except for Qatar, they document high herding in crash volatility regimes in all of the countries they study.