Pre and Post Covid-19 Influence of Herding Effect Bias on Investment Decision of Shariah Compliant Stocks in Pakistan Stock Exchange

Abstract

In this study, the researcher examined the impact of the herding effect bias, specifically pre and post-Covid-19, on Pakistani stock investors' decisions to invest in Shariah-compliant stocks. Financial markets around the world have evolved and had a significant impact on investors' decision-making in many ways with Covid-19. Traditional investment strategies, such as depositing money in banks, owning fixed-term deposits, or buying prize bonds, are now outdated in the present economic climate. Investors now make wiser investments than they did prior to the Covid-19 outbreak. The Shariah Compliant Stocks index is a stock market index on the Pakistan Stock Exchange (PSX) of 256 companies that have been examined for compliance with Islamic Shariah principles. Investor in this market prefer selling stocks that fell during the pandemic and aim to take advantage of the chance to earn higher returns now that these markets are picking up steam. Due to the phenomenon of herding bias, Pakistani stock market investors, and more especially the Shariah Compliant Stocks index, are one of those markets that are gaining their pace. Researcher in this paper attempted to address the influence of herding effect bias on Pakistani stock investors' investment decisions before and after Covid-19, then evaluated the impact of both variables on the performance of the Pakistan stock market pre-covid 19 and post- Covid 19. The researcher employed the systematic sampling technique, specifically Shariah Compliant Stocks, to Pakistani stock investors due to quantitative nature of the study, data was collected through a questionnaire survey technique and then data was analyzed through SPSS21 Software by applying different statistical tests i.e: Descriptive statistics, correlation, and its analysis were used by the researcher. Logistic Regression Model, Reliability Statistics, ANOVA, and Cronbachs Alpha.  Theoretical framework of this study was backed by theories of Behavior in Finance. The findings of this study suggest that the effects of the Herding effect bias on individual investors' decisions concerning Shariah-compliant stocks were positive both pre and post the Covid-19 pandemic.