This study examines the herding behavior of banking sector of Pakistan by using 20 banks listed at Pakistan stock exchange (PSX) for the period of 2009 to 2018. The study has employed two different methodologies suggested by Christie & Huang (1995) and Chang, Cheng, and Khorana (2000) to investigate the herding behavior of the banking sector. The results of the study found no herding behavior in the Pakistan banking sector during 2009-2018. It explains clearly that investors are not forming herds in the times of asymmetry in the market regarding liquidity and volatility. Similarly, this study has also investigated the herding behavior in the presence of different macroeconomic variables. The results report that macroeconomic indicators are not considered by financial investors while making investment decisions. The study suggests that the banking stocks of PSX are inefficient and does not follow the assumption of efficient market hypothesis (EMH). The reasons behind this irrational behavior is not yet clearly investigated and specified. Future researchers can explore the reasons of these inefficiencies in the Pakistani market. Supervisor:- Dr. Ahmad Faraz