HERDING BEHAVIOR OF ENERGY SECTORS LISTED IN THE ASEAN EMERGING STOCK MARKET

Abstract

This study investigates herd behavior of the energy sector in the Indonesian and Malaysian capital markets, as well as whether oil prices and the fed funds rate drive herd behavior in the two ASEAN emerging capital markets. To fulfill the research objectives, daily closing stock price data for each stock listed in the energy sectors from 2015 to 2022 were employed. In the way to achieve its objectives, this study employed a cross-sectional dispersion technique. The study's findings indicate that herding behavior was not observed in the energy sector documented in the Indonesian stock market, both for the complete research period and during COVID-19, also oil prices and the fed funds rate do not induce herding behavior. Meanwhile, herding behavior was observed in the energy sector of Malaysian capital markets, both during the full research period and during the COVID-19 pandemic, and oil prices did not encourage herding behavior, whereas the fed funds rate encouraged herd behavior of energy sector. The findings of this study would serve as a source of knowledge for ASEAN capital market policymakers in order to sustain capital market stability and prevent herding behavior.