The brokerage firm effect in herding: Evidence from Indonesia

Sumit Agarwal, I-Ming Chiu, Chunlin Liu, Sangghon Rhee

Research output: Contribution to journalArticleResearchpeer-review

17 Citations (Scopus)


We examine herding behavior of domestic and foreign investors in the Indonesian stock market. We document that both domestic and foreign investors from a particular brokerage firm tend to herd. The foreign investors exhibit a greater propensity to herd than domestic investors. However, when examining investor trading across brokerage firms, we find only weak evidence of herding by domestic investors and no herding by foreign investors. Our overall findings suggest a strong brokerage firm effect on herding but a weak marketwide effect. Moreover, we find evidence that the strong brokerage effect on herding is likely driven by acting on common information.
Original languageEnglish
Pages (from-to)461 - 479
Number of pages19
JournalJournal of Financial Research
Issue number3
Publication statusPublished - 2011
Externally publishedYes

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