The Effect of Fundamental Variables on the Formation of Herding Behavior in the Iranian Capital Market

Document Type : Original Article

Authors

1 Ph.D. Student of Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran

2 Associate Professor, Department of Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran

3 Assistant Professor , Department of Accounting ,South Tehran Branch, Islamic Azad University, Tehran, Iran

Abstract

In recent years, with the governance of behavioral finance paradigm and the standard national theories being challenged, due to their disability in explaining the observed anomalies in the capital market, financial researches have entered into a new intellectual era and in some of the researches, assumptions of modern financial economics have been challenged. One of these assumptions is the assumption that investors are logical and this is seriously challenged and several studies have been devoted to this issue. The purpose of this study is to investigate the effect of fundamental variables on the formation of herding behavior in the Iranian capital market. Experimental findings of the investigation of 110 companies listed on the Tehran Stock Exchange from 2009 to 2019 shows the formation of herding behavior in the Iranian capital market. The results of the present study also confirm that there is a positive and significant relationship between changes in the fundamental variables of accounting (changes in stock returns, changes in assets, changes in sales) and the formation of herding behavior in the Iranian capital market. Analyzing these results, it can be stated that changes in fundamental variables lead to the formation of unintentional herding behavior in the Iranian capital market.

Keywords