Herd behavior in Turkey stock market: An empirical analysis based on stock beta coefficient

Traditional finance theories are based on the idea that individuals are rational and do not take into account psychological factors that influence investors and financial decisions. The behavioral finance discipline which assumes opposite of this has shown that investors are showing different psychological tendencies during the decision processes and continuity of this situation has provided a lot of evidences to the literature. The behavioral finance defends that traditional finance models argue that the individuals are away from rationality at the point of failure to explain price bubbles and subsequent collapse and crisis which common in markets and destabilize markets by showing herd behavior and increase fragility with market volatility. In this study herd existence in Turkish Financial Markets was investigated by using Hwang and Salmon (2004) model which depends on stock beta coefficients, one of the measurement methods of the behavioral finance. Caparrelli's, D'Arcangelis's and Cassuto's (2004) implications were used in the implementation phase of the model. According to the results of the analysis, results supporting the existence of herding behavior in BIST have been reached.