Foreign Investor Trading and Herding Behavior in Vietnam Stock Market

We use the aggregate trading data of the largest stock exchange in Vietnam to investigate herding behavior. The results reveal that herding presents in Vietnam market, but the types of stocks herded vary given the market conditions, liquidity and foreign investors trading. Herding appears to concentrates in market down-days, and in liquid stocks. Stocks that foreign investors net buy are herded aggressive across all liquidity level and in all market conditions. Stocks that foreign investors net sell are herded only in market up-days, and mostly within the groups of liquid stocks. Herding does not occur in stocks of zero net foreign trading, regardless of liquidity and market conditions. Based on the findings that foreign investors net buy herded stocks in both market upturns and downturns, and also net sell liquid herded stocks in market downturns, we conjecture that foreign trading can possibly alleviate extreme movements of the market.