Investor Herding Behaviour and Stock Price Volatility: Evidence from Vietnam's Emerging Market during Global Economic Uncertainty

This study investigates the relationship between herding behavior and stock price volatility in the Vietnamese stock market, with a particular focus on the moderating role of global economic uncertainty. Using a comprehensive dataset of 756 listed companies on both the Ho Chi Minh and Hanoi Stock Exchanges from 2010 to 2016, yielding 2,268 firm-year observations, the research employs multiple methodological approaches including GARCH modeling, panel regression analysis, and System GMM estimation. Herding behavior is measured using the Cross-Sectional Absolute Deviation (CSAD) approach, while stock price volatility is captured through various measures including GARCH (1,1) and realized volatility estimates. The empirical findings reveal significant evidence of herding behavior in the Vietnamese market, with a strong positive relationship between herding and stock price volatility (β = 0.456, p < 0.01). Global economic uncertainty is found to significantly moderate this relationship, amplifying the impact of herding on volatility during periods of heightened global uncertainty. The study contributes to the existing literature by providing novel insights into the dynamics of herding behavior in emerging markets and its interaction with global economic conditions. These findings have important implications for investors, policymakers, and market regulators, particularly in the context of emerging market economies and their increasing integration with global financial markets.