Herding in Large Cap Stocks during Bull Markets: Evidence from Dow Jones Industrial Stocks

We investigate evidence of investor herding in individual component stocks of the Dow Jones Industrial Index. In the correlation analysis, all stocks show positive correlations between their price and trading volume changes. In the dummy regression, most stocks in their equal- and value-weights show strong herd behavior in the upper values relative to their moving average prices. In log-log regression, we find a diminishing marginal effect in the upper values of their moving average prices. We find that the greater the dispersion of a stock away from its moving average line, the stronger the evidence of true herding in the movement of its price and concomitant change in trading volume.