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Institutional Herding in the ADR Market

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Author Info
Diane DeQing Li ()
Kenneth Yung ()
Abstract

This study examines institutional herding in the ADR market between 1985 and 1998. We find a significant positive relation between changes in institutional ownership and ADR returns over the same period. The positive relation persists after we control for the momentum effect in the US stock markets. We also find that in the ADR market, past winners (losers) in the herding period continue to be the winners (losers) in the post-herding period. The lack of a returns reversal suggests institutional herding is related to momentum trading. However, the positive relation between institutional ownership changes and ADR returns remains after controlling for momentum trading in the ADR market. Our results also rule out that positive feedback trading is related to institutional herding in the ADR market.

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Article provided by Springer in its journal Review of Quantitative Finance and Accounting.

Volume (Year): 23 (2004)
Issue (Month): 1 (07)
Pages: 5-17
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Handle: RePEc:kap:rqfnac:v:23:y:2004:i:1:p:5-17

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Web page: http://springerlink.metapress.com/link.asp?id=102990

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  1. Rani Hoitash & Murugappa (Murgie) Krishnan, 2008. "Herding, momentum and investor over-reaction," Review of Quantitative Finance and Accounting, Springer, vol. 30(1), pages 25-47, January. [Downloadable!] (restricted)
  2. Yaw Mensah & Robert Werner, 2008. "The capital market implications of the frequency of interim financial reporting: an international analysis," Review of Quantitative Finance and Accounting, Springer, vol. 31(1), pages 71-104, July. [Downloadable!] (restricted)
  3. Warren Dean & Robert Faff, 2008. "Evidence of feedback trading with Markov switching regimes," Review of Quantitative Finance and Accounting, Springer, vol. 30(2), pages 133-151, February. [Downloadable!] (restricted)
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