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The bias in a standard measure of herding

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  • Raphaëlle Bellando

    ()
    (Laboratoire d''Economie d''Orléans UMR CNRS 7322)

Abstract

We address the Lakonishok, Shleifer and Vishny (LSV) herding measure. Frey, Herbst and Walter (FHW) have shown by empirical simulations that LSV is biased. Using a theoretical model we provide a formal explanation of this bias, and show that a corrected herding measure depends on some unobservable parameters. This suggests that assessing herding intensity with this kind a more difficult task than considered up to now in the empirical literature.

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File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I2-P148.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 32 (2012)
Issue (Month): 2 ()
Pages: 1537-1544

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Handle: RePEc:ebl:ecbull:eb-12-00111

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Keywords: herding; herding measures; fund management;

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  1. Demirer, RIza & Kutan, Ali M., 2006. "Does herding behavior exist in Chinese stock markets?," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 16(2), pages 123-142, April.
  2. Hwang, Soosung & Salmon, Mark, 2004. "Market Stress and Herding," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4340, C.E.P.R. Discussion Papers.
  3. Gaston Gelos & Eduardo Borensztein, 2000. "A Panic-Prone Pack? the Behavior of Emerging Market Mutual Funds," IMF Working Papers 00/198, International Monetary Fund.
  4. Raphaëlle Bellando, 2010. "Measuring herding intensity: a hard task," Working Papers, HAL halshs-00517610, HAL.
  5. Sushil Bikhchandani & Sunil Sharma, 2001. "Herd Behavior in Financial Markets," IMF Staff Papers, Palgrave Macmillan, vol. 47(3), pages 1.
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