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Herding in Smart-Beta Investment Products

Author

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  • Eduard Krkoska

    (Department of Economics, School of Social Sciences, University of Manchester, Manchester M13 9PL, UK)

  • Klaus Reiner Schenk-Hoppé

    (Department of Economics, School of Social Sciences, University of Manchester, Manchester M13 9PL, UK
    Department of Finance, NHH–Norwegian School of Economics, 5045 Bergen, Norway)

Abstract

We highlight herding of investors as one major risk factor that is typically ignored in statistical approaches to portfolio modelling and risk management. Our survey focuses on smart-beta investing where such methods and investor herding seem particularly relevant but its negative effects have not yet come to the fore. We point out promising and novel approaches of modelling herding risk which merit empirical analysis. This financial economists’ perspective supplements the vast statistical exploration of implementing factor strategies.

Suggested Citation

  • Eduard Krkoska & Klaus Reiner Schenk-Hoppé, 2019. "Herding in Smart-Beta Investment Products," JRFM, MDPI, vol. 12(1), pages 1-14, March.
    • Handle: RePEc:gam:jjrfmx:v:12:y:2019:i:1:p:47-:d:215980
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    Cited by:

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    4. Sayyed Sadaqat Hussain Shah & Muhammad Asif Khan & Natanya Meyer & Daniel F. Meyer & Judit Oláh, 2019. "Does Herding Bias Drive the Firm Value? Evidence from the Chinese Equity Market," Sustainability, MDPI, vol. 11(20), pages 1-20, October.
    5. David Edmund Allen & Elisa Luciano, 2019. "Risk Analysis and Portfolio Modelling," JRFM, MDPI, vol. 12(4), pages 1-4, September.
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    7. Tetiana Zholonko & Olesia Grebinchuk & Maryna Bielikova & Yurii Kulynych & Olena Oviechkina, 2021. "Methodological Tools for Investment Risk Assessment for the Companies of Real Economy Sector," JRFM, MDPI, vol. 14(2), pages 1-10, February.

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    Keywords

    herding; factor investing; risk;
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