A research on market-directed herd behavior in share markets: an empirical application on Borsa İstanbul

After Daniel Kahneman won the 2002 Nobel Prize in Economics for his work "Expectation Theory", studies in Behavioral Finance have begun to come to the fore. One of the phenomena that contradicts the concept of rational human (Homo Economicus), which is one of the basic assumptions of the efficient markets hypothesis, is the irrational herd behavior seen in the stock markets. Many quantitative measurement methods have been developed to detect herd behavior in stock markets. The most well-known methods of measuring herd behavior are Lakonishok, Shlelifer and Vishny Model (1991), Christie and Huang Model (1995), Chang, Cheng and Khorona Model (2000) and finally Hwang and Salmon Model (2001). In this study, an empirical study was conducted to determine the market-directed herd behavior in Borsa Istanbul between 31.12.2016 and 31.12.2021 and the findings were discussed. For the determination of herd behavior, the method developed by Christie and Huang (1995) based on the cross-sectional standard deviations of the share returns and the method developed by Chang, Cheng and Khorana (2000) based on the horizontal section absolute deviations of the share returns are used.