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Mutual fund herding its impact on stock returns: Evidence from the Taiwan stock market

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  • Hung, Weifeng
  • Lu, Chia-Chi
  • Lee, Cheng F.
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    Abstract

    Using quarterly ownership data which identify identity codes of mutual funds in Taiwan, we investigate mutual fund herding and its impact on stock price. We show that mutual funds tend to follow their own steps in trading rather than follow trades made by other funds. More importantly, evidence of price continuation following mutual fund herd buying suggests that such herding is based on value-relevant information and is consistent with the investigative herding hypothesis. Alternatively, evidence of return reversal following mutual fund herd selling suggests that such herding is non-informational and is consistent with the characteristic herding hypothesis.

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    Bibliographic Info

    Article provided by Elsevier in its journal Pacific-Basin Finance Journal.

    Volume (Year): 18 (2010)
    Issue (Month): 5 (November)
    Pages: 477-493

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    Handle: RePEc:eee:pacfin:v:18:y:2010:i:5:p:477-493

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    Web page: http://www.elsevier.com/locate/pacfin

    Related research

    Keywords: Mutual funds Herding Feedback trading Institutional trading;

    References

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    Cited by:
    1. Hao FANG & Yang-Cheng Lu & Hwey-Yun Yau & Yen-Hsien Lee, 2013. "Stock Characteristics Herded By Foreign Investors With Higher Abnormal Returns In The Taiwan Stock Market," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 232-245, December.

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