Do Herd Behaviours Exist in Malaysian Stock Market?

Upcoming article written by Toh, G.G. (KTAR) and Hooy, C.W. (USM)

The Malaysian Stock market has been on a roller coaster ride. In 1993, the benchmark KLCI surpassed the 1,000 mark hurdle. Due to the 1997 Asian Financial Crisis, the KLCI slumped by more than 500 points within six months. However, in mid-August 2009, we seemed to observe a rebound n the Malaysian stock market. Following the euro crisis 2010, investor sentiment remained cautious. The traditional financial theory seems to be incapable to reconcile the dramatic fluctuations in the stock market. There is a problem associated with the traditional theory - investors are assumed to be rational. However, investors are found to be irrational in real life. Could psychological attributes of investors i.e. herd behaviour be used to explain such stock price movement?