Scale Development and Impact of Herd Behaviour on Mutual Fund Investment Decision: an Empirical Study with Structural Equation Modelling Approach

Abstract

Herd behaviour is a common phenomenon in the Indian stock market. Herding is one of the prominent behavioural biases that investor carry along with many other popular biases. Herding behavivour means following the path that majority investors follow, and going with the market trend without verifying it on logical and rational grounds of investment. Herding behaviour is not only prevaelant in the stock market but it is equally relevant for the mutual funds investment also. The present study is empirical in nature in which data has been collected from 460 investors investing in the mutual funds. The study has been divided in two parts, firstly it develops a measurement scale on herd behaviour with the help of CFA (Confirmatory Factor Analysis) and secondly it finds the impact of herd behaviour on mutual fund decision making with the help of SEM (Structural Equation Modelling) with the help of AMOS (Analysis of Moment Structure). It was found from the study all three constructs of Herd Behaviour i.e. General Herd Behaviour, Avoid Risk and Feeling Secure and Ease & Convenience have significant impact on Mutual Fund Decision Making.