Herding Behavior and Investor Investment Decisions in Capital Market Dian Kurnianingrum1, Nugraha Nugraha2, Disman Disman3, and Budi Supriatono Purnomo 4
Universitas Pendidikan Indonesia, Bandung, Indonesia
Abstract
The paradigm of conventional financial science assumes that market participants are rational in explaining financial markets. Sadly, it was later discovered that the aggregate capital market, the average rate of return, and the behavior of traders did not conform to these assumptions. Herding is a behavioral bias that can influence individual and institutional investors investment decisions. The fear of getting a loss on an investment will encourage human instincts to follow the information conveyed by the news or other investors, even though this step is not necessarily correct. This study consists of a literature review. Researchers compiled credible articles that explored the impact of herding tendency on investors investment decisions. The journal is then classified as empirical, conceptual, and literary. In the first part, this paper discusses the effect of herding behavior and the factors causing herding behavior in the financial market. Then this paper continued to discuss research related to herding behavior from early 1990. As a closing, researcher explain study discusses how to identify the occurrence of herding behavior in the financial market.
