When the Crowd Moves: Investor Herding in Indonesia’s Bull and Bear Markets

Objective: This study aims to examine investor herding behavior in Indonesia’s capital market during distinct market conditions in 2023, specifically bullish and bearish periods. The analysis employs a quantitative research design, utilizing data from 504 publicly traded companies listed on the Indonesia Stock Exchange between late December 2022 and late December 2023. Research Design & Methods: The study employs the Cross-Sectional Absolute Deviation (CSAD) method and multiple regression analysis to investigate herding behavior across 119 bullish and 120 bearish trading days. Findings: The findings reveal no significant herding behavior during bullish markets, while substantial evidence of herding is observed in bearish market conditions. This suggests that investors tend to follow market sentiment rather than relying on independent decision-making during downturns. Implications and Recommendations: The observed behavior may be attributed to limited financial literacy and a lack of comprehensive understanding of market mechanisms. These results underscore the pressing need for targeted financial education initiatives to foster more rational investment behavior. Contribution & Value Added: The study contributes to the behavioral finance literature by providing empirical insights into market-specific herding tendencies in an emerging economy, underscoring the role of investor education in strengthening market stability and efficiency.