The Effect of Foreign Sell, Required Return, Expected Return, Actual Return, and Risk on Herding Behavior

Pristin Prima Sari; Ardian Prima Putra; Harmadi Harmadi

doi:10.37641/jimkes.v14i3.5255

Authors

Pristin Prima Sari Universitas Sarjanawiyata Tamansiswa, Yogyakarta, Indonesia
Ardian Prima Putra Universitas Veteran Bangun Nusantara, Indonesia
Harmadi Harmadi Universitas Sebelas Maret, Indonesia

DOI:

https://doi.org/10.37641/jimkes.v14i3.5255

Keywords:

Actual Return, Expected Return, Herding Behavior, IDX, Required Return, Risk

Abstract

This study is motivated by the phenomenon of herding behavior in the capital market, which is influenced by various financial factors, including foreign sell, required return, expected return, actual return, and risk, particularly in manufacturing companies listed on the Indonesia Stock Exchange during the 2024–2025 period. The objective of this study is to obtain empirical evidence regarding the effect of these variables on herding behavior in January and December 2024–2025. The method employed is a quantitative approach through hypothesis testing using data from manufacturing firms as the research sample. The results indicate that in January, actual return and beta risk have a significant effect on herding, and simultaneously, all variables significantly influence herding behavior. Meanwhile, in December, required return and expected return are found to have a significant effect on herding. The difference test reveals significant differences in expected return and actual return between January and December. The implications of this study provide insights for investors and companies in understanding market behavior and formulating more rational investment strategies. In conclusion, return and risk factors play a crucial role in shaping herding behavior in the Indonesian capital market.

Downloads

Download data is not yet available.

References

Adnan, M. (2023). Modeling herding behavior in the Indonesian capital market. International Journal of Economics, Business and Management Research, 7(04), 167–179.

Ahmad, S. (2017). Factors influencing individual investors’ behavior: An empirical study of Pakistan financial markets. Journal of Business & Financial Affairs, 4(6), 1–8.

Alexandridis, A. K., & Hasan, M. S. (2020). Global financial crisis and multiscale systematic risk: Evidence from selected European stock markets. International Journal of Finance & Economics, 25(4), 518–546.

Aharon, D. Y. (2021). Uncertainty, fear and herding behavior: Evidence from size-ranked portfolios. Journal of Behavioral Finance, 22(3), 320–337.

Arroisi, A., & Koesrindartoto, D. P. (2019). Domestic and foreign investor dynamics in Indonesian Stock Exchange: Evidence from 10 years high-frequency data. Indonesian Capital Market Review, 11(1), 4–16.

Baker, W. E., & Iyer, A. V. (1992). Information networks and market behavior. Journal of Mathematical Sociology, 16(4), 305–332.

Blasco, N., Corredor, P., & Ferreruela, S. (2012). Does herding affect volatility? Implications for the Spanish stock market. Quantitative Finance, 12(2), 311–327.

Biondo, A. E., Mazzarino, L., & Pluchino, A. (2024). Trading strategies and financial performances: A simulation approach. International Review of Financial Analysis, 95(1), 103–126.

Botosan, C. A., Plumlee, M. A., & Wen, H. E. (2011). The relation between expected returns, realized returns, and firm risk characteristics. Contemporary Accounting Research, 28(4), 1085–1122.

Campbell, J. Y., & Mei, J. (1993). Where do betas come from? Asset price dynamics and the sources of systematic risk. The Review of Financial Studies, 6(3), 567–592.

Christie, W. G., & Huang, R. D. (1995). Following the pied piper: Do individual returns herd around the market? Financial Analysts Journal, 51(4), 31–37.

Cont, R., & Bouchaud, J. P. (2000). Herd behavior and aggregate fluctuations in financial markets. Macroeconomic Dynamics, 4(2), 170–196.

Hoitash, R., & Krishnan, M. (2008). Herding, momentum and investor over-reaction. Review of Quantitative Finance and Accounting, 30(1), 25–47.

Hwang, S., & Salmon, M. (2004). Market stress and herding. Journal of Empirical Finance, 11(4), 585–616.

Ikhsan, M., Sakti, S. H., Abdoellah, M. N., & Hendro, J. (2024). The influence of representativeness bias and herding effect on investment decisions in the capital market. Escalate: Economics and Business Journal, 2(01), 1–8.

Karki, D., Dahal, R. K., Devkota, N., & Bhattarai, U. (2024). Investors’ intrinsic motives and decision-making in the stock market. Intellectual Economics, 18(1), 59–79.

Kim, W., & Wei, S. J. (2002). Foreign portfolio investors before and during a crisis. Journal of International Economics, 56(1), 77–96.

Loang, O. K. (2025). Financial stability at risk: Evidence from market overreaction and herding behaviour in developed and emerging markets. China Finance Review International, 15(1), 67–92.

Mand, A., Janor, H., Abdul Rahim, R., & Sarmidi, T. (2023). Herding behavior and stock market conditions. PSU Research Review, 7(2), 105–116.

Maneemaroj, P., Lonkani, R., & Chingchayanurak, C. (2021). Appropriate expected return and the relationship with risk. Global Business Review, 22(4), 865–878.

Mohajan, H. K. (2020). Quantitative research: A successful investigation in natural and social sciences. Journal of Economic Development, Environment and People, 9(4), 50–79.

Obamuyi, T. M. (2013). Factors influencing investment decisions in capital market: A study of individual investors in Nigeria. Organizations and Markets in Emerging Economies, 4(07), 141–161.

Ouarda, M., El Bouri, A., & Bernard, O. (2013). Herding behavior under market conditions: Empirical evidence on the European financial markets. International Journal of Economics and Financial Issues, 3(1), 214–228.

Parihar, A. S., & Gupta, G. C. (2024). Examine how political and economic uncertainty influences stock market volatility and investor behaviour. International Journal of Commerce and Management Research, 10(3), 31–35.

Peterson, L., Homer, A. L., & Wonderlich, S. A. (1982). The integrity of independent variables in behavior analysis. Journal of Applied Behavior Analysis, 15(4), 477–492.

Puspitarini, N., & Prajawati, M. I. (2025). How herding behaviour and financial literacy affect young people’s investment decisions. Jurnal Akuntansi, Ekonomi dan Manajemen Bisnis, 13(1), 54–62.

Qasim, M., Hussain, R., Mehboob, I., & Arshad, M. (2019). Impact of herding behavior and overconfidence bias on investors’ decision-making in Pakistan. Accounting, 5(2), 81–90.

Rahayu, A. D., Putra, A., Oktaverina, C., & Ningtyas, R. A. (2021). Herding behavior in the stock market: A literature review. International Journal of Social Sciences Review, 1(2), 08–25.

Rahayu, S., Rohman, A., & Harto, P. (2021). Herding behavior model in investment decision on emerging markets: Experimental in Indonesia. Journal of Asian Finance, Economics and Business, 8(1), 053–059.

Sadewo, R. A. J., & Cahyaningdyah, D. (2022). Investor herding behavior in extreme conditions during COVID-19: Study on Indonesian stock market. Management Analysis Journal, 11(1), 22–29.

Seetharaman, A., Niranjan, I., Patwa, N., & Kejriwal, A. (2017). A study of the factors affecting the choice of investment portfolio by individual investors in Singapore. Accounting and Finance Research, 6(3), 153–168.

Shankar, K. U., Ahmad, W., & Kareem, S. A. (2021). Beta volatility and its consequences for hedging systematic risk with reference to stock market during COVID-19. Information Technology in Industry, 9(3), 482–492.

Spyrou, S. (2013). Herding in financial markets: A review of the literature. Review of Behavioral Finance, 5(2), 175–194.

Thamrin, T., Satrianny, I. P., Nasib, N., Amelia, R., & Julitawaty, W. (2025). The perceived risk in augmented reality on students’ online purchase decisions. Jurnal Ilmiah Manajemen Kesatuan, 13(4), 2485–2496.

Vieito, J. P., Espinosa, C., Wong, W. K., Batmunkh, M. U., Choijil, E., & Hussien, M. (2024). Herding behavior in integrated financial markets: The case of MILA. International Journal of Emerging Markets, 19(11), 3801–3827.

Vo, X. V., & Phan, D. B. A. (2019). Herding and equity market liquidity in emerging market: Evidence from Vietnam. Journal of Behavioral and Experimental Finance, 24(1), 100–129.

Wang, P., & Nuangjamnong, C. (2022). Determinant factors of overconfidence, herding behavior, and investor elements on investment decision making in China. Universal Journal of Financial Economics, 1(1), 23–42.

Wibowo, B. Y. (2025). Behavioral economics insights into consumer decision-making in online marketplaces. Jurnal Ilmiah Manajemen Kesatuan, 13(4), 2133–2142.

Zakamulin, V. (2024). Stock price overreaction: Evidence from bull and bear markets. Review of Behavioral Finance, 16(6), 998–1011.

Zhang, Y. A., Li, Y., & Li, H. (2014). FDI spillovers over time in an emerging market: The roles of entry tenure and barriers to imitation. Academy of Management Journal, 57(3), 698–722.