Behavioral finance and anomalies: Testing existance of herd behavior in Borsa İstanbul

Nowadays, the increasing importance of the concept of the human being has begun to stand out in finance science as well as in other sciences. The behaviors of investors that give financial decisions are influenced by psychological, sociological, etc. factors. Behavioral Finance, a subdivision of finance, is the study of financial behavior by transferring these factors to finance science. The decision taken by alone investors can be different when they are influenced by crowd of people.Herd behavior advocates the assumption that "investors are irrational", contrary to the assumption that the Effective Market Hypothesis is "investors are rational". In the light of the methods developed to test the presence of herd behavior, it has been tried to find out whether irrational behavior has been shown by investors in Stock Exchange Istanbul. In the literature, it is aimed to evaluate the herd behavior behavior of BİST stocks and indexes by using Christie & Huang (1995), Chang, Cheng & Khorona (2000) and Hwang & Salmon (2004). The herd behavior measurement methods developed by C-H (1995), C-C-K (2000) and H-S (2004) were applied to daily and weekly data by evaluating all the shares traded in Stock Exchange Istanbul. Two different data sets were created by determining the shares traded on a continuous basis between 01.01.1997 - 06.10.2017 for all BİST shares. The study was conducted with adjusted returns derived from the closing prices of stable BİST shares traded in BİST 100 and traded outside BİST 100. As a result of the study, there was no evidence of herd behavior in Stock Exchange Istanbul according to C-H (1995), C-C-K (2000) methods. As a result of the analysis, there is no herd behavior in the BIST according to the C-H (1995) method, which suggests that stocks have a linear relationship between the horizontal section standard deviation (CSSD) values and the return of the index. Also there is no herd behavior in the BIST According to the C-C-K (2000) method, which suggests that stocks have a nonlinear relationship between horizontal section absolute deviation (CSAD) values and return of the index. According to the method of Hwang and Salmon (2004) in which the horizontal section deviations of stocks Beta coefficients and the herd behavior were tried to be explained, in both datasets were found to indication the presence of swarm behavior at the same time intervals.