Herding Under Asymmetric Market Stress: COVID-19 Impact on Indonesia's Sharia Stock Market

This study investigates herding behavior within Indonesia's Sharia-compliant stock market under asymmetric market stress during the COVID-19 pandemic. The research examines stocks listed on the Jakarta Islamic Index (JII), using daily data across three distinct periods: pre-crisis (January 2, 2019 - December 31,2019), crisis (January 2,2020 - December 31,2022), and post-crisis (January 2, 2023 - December 31,2023). Cross-sectional absolute deviation (CSAD) is employed to detect herding behavior. The results show that market volatility, measured by CSAD, peaked during the crisis period, with herding behavior becoming more evident. This behavior is attributed to heightened market uncertainty during the pandemic, where investors exhibited a tendency to follow the majority. In the post-crisis period, a gradual stabilization in market conditions is observed. These findings provide significant insights into investor behavior in Sharia stock markets under asymmetric stress, particularly during global financial crises like the COVID-19 pandemic.