Herding Behavior in the Nairobi Securities Exchange*

Abstract

In this study, we use 2010-15 daily data stock market from the Nairobi Securities Exchange (NSE) to investigate herding behavior among NSE market participants. We examine the impact of rising and falling markets, as well as exogenous factors such as political and regulatory instability, on herding behavior. Our findings are twofold. First, herding behavior differs by sector, moreover, each sector responds differently to rising and falling markets. Thus, failing to consider each sector separately may mask herding behavior. Second, herding behavior is most pronounced from 2013 through 2014, which was a time of both political and regulatory instability for Kenya.