Herding of institutional traders

Arbeitspapier

This paper sheds new light on herding of institutional investors by using a unique and superior database that identifies every transaction of financial institutions. First, the analysis reveals herding behavior of institutions. Second, the replica- tion of the analysis with low-frequent and anonymous transaction data, on which the bulk of literature is based, indicates an overestimation of herding by previous studies. Third, our results suggest that herding by large financial institutions is not intentional but results from sharing the same preference and investment style. Fourth, a panel analysis shows that herding on the sell side in stocks is positively related to past returns and past volatility while herding on the buy side is nega- tively related to past returns. In contrast to the literature, this indicates that large financial institutions do not show positive feedback strategies.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB 649 Discussion Paper ; No. 2010,025

Classification and Topics

• Classification: Wirtschaft ; Portfolio Choice; Investment Decisions ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
• Subject: Investor Behavior ; Institutional Trading ; Stock Prices ; Institutioneller Anleger ; Anlageverhalten ; Herdenverhalten ; Portfolio-Management ; Welt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kremer, Stephanie
• Event: Veröffentlichung
• (who): Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk
• (where): Berlin
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/39285
• Last update: 10.03.2025, 11:45 AM CET