Investor Behavior: Does Tax Avoidance and Liquidity Preference Culture Drive Equity Prices in Pakistan

The present study investigates market-wide herding of stock market, industry indices of Pakistan, China and USA, A-cross border herding of Pakistan stock market with Chinese stock market and USA stock market. With Cross-Sectional-Absolute-Deviation, to check whether geographical distance matters to influence the stock markets or not and USA is its major influential, cannot be ignored. Market-wide herding in Pakistan is found only during 2004 and 2008 and A-cross border herding for Pakistan is only found from the USA which support asset pricing model and market efficiency. Pakistan market do not herd around China, this negates geographical distance matters, and influence in determining investor behaviour in stock markets. It is revealed, Pakistan stock market does not observe as much herding behaviour in stock investment as other markets (USA and China), so it can be said that Pakistan stock exchange index which is representative of Pakistan Stock market is efficiently operating in contest of Herding.