Investor Psychology in the Bangladesh Equity Market: An Examination of Herding Behavior Across Diverse Market States

The results reveal significant evidence of herding in the overall, bearish, and extended crisis market phases during extreme downturns, while the magnitude of market returns in the tail distribution is considered. Asymmetric herding behavior is more pronounced and prevalent, conditioned by market dimensions like return direction, trading volume, and volatility, with CSSD proving more effective than CSAD in detecting asymmetric patterns. Notably, herding strongly appears in the COVID-19 market during periods of abnormally high market volatility, reflecting heightened market sentiment. Applying Dow Theory to delineate bull and bear market phases significantly improved the methodological complexity and analytical depth related to herding behavior. These findings suggest policy implications for regulators and market participants in minimizing herding effects to create an efficient market environment through enhanced market surveillance, improved investor education, and the use of advanced technologies.