Herd behavior

Herd behavior in financial markets is one example of the existence of inefficient markets. It is the tendency for individuals to mimic the actions (rational or irrational) of other investors. To model herd behavior, there are several models that empirical researchers have used. The most commonly used models are Christie and Huang (1995) and Change et al. (1999).


Our Stata Code

We have developed easy to use yet robust codes for estimating herd behavior using the above-mentioned models. Specifically, our codes estimate cross-sectional standard deviation of returns (CSSD) as a measure of the average proximity of individual asset returns to the realized market average CSSD (Christie and Huang 1995);  and cross-sectional absolute deviation of returns, i.e., CSAD of Change et al. (1999). The codes need just a basic understanding of Stata. Further, our comments with each line of code will surely help you to not only apply the code but also understand the process more clearly. 



Code for 2 models (variations) is available for $199, plus a $50 for raw data processing (in case the data is not in Stata format and variables are not already constructed). For further details, please contact us at:


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  • Source Code
  • Comments
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  • Source Code
  • Data Handling
  • Comments
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  • Source Code
  • Example Dataset
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Package includes the source code, comments, and email support.

Package includes the source code, comments, and an example dataset that matches the code. The example dataset facilitates the application of the code as all the variable names in the code match exactly the variable names in the dataset.

Package includes the source code, comments, and client's data handling which include merging different datasets, importing data from Excel or CSV files, data cleaning, etc.

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  1. Christie, W. G., & Huang, R. D. (1995). Following the pied piper: Do individual returns herd around the market?. Financial Analysts Journal51(4), 31-37.
  2. Chang, E. C., Cheng, J. W., & Khorana, A. (2000). An examination of herd behavior in equity markets: An international perspective. Journal of Banking & Finance24(10), 1651-1679.