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Fund Manager Herding: A Test of the Accuracy of Empirical Results Using U.K. Data

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  • Sam Wylie

    (Melbourne Business School)

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    Abstract

    The portfolio holdings of 268 U.K. equity mutual funds are employed to test the accuracy of the Lakonishok, Shleifer, and Vishny (1992) measure of herding and test for herding among U.K. mutual fund managers. After adjusting for the biases in the LSV herding measure, the results reveal the existence of a modest amount of fund manager herding in the largest and smallest individual U.K. stocks but little herding in other stocks or stocks aggregated by industry. Contrary to previous U.S. results, we find that U.K. mutual fund managers tend to herd out of large stocks after high excess returns.

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    Bibliographic Info

    Article provided by University of Chicago Press in its journal Journal of Business.

    Volume (Year): 78 (2005)
    Issue (Month): 1 (January)
    Pages: 381-403

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    Handle: RePEc:ucp:jnlbus:v:78:y:2005:i:1:p:381-380

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    Web page: http://www.journals.uchicago.edu/JB/

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    Cited by:
    1. Sumit Agarwal & I‐Ming Chiu & Chunlin Liu & S. Ghon Rhee, 2011. "The Brokerage Firm Effect In Herding: Evidence From Indonesia," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 34(3), pages 461-479, 09.
    2. Ashok Thomas & Luca Spataro & Nanditha Mathew, 2013. "Pension funds and Stock Market Volatility: An Empirical Analysis of OECD countries," Discussion Papers 2013/162, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    3. Klein, Arne C., 2013. "Time-variations in herding behavior: Evidence from a Markov switching SUR model," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 291-304.
    4. Kremer, Stephanie & Nautz, Dieter, 2013. "Causes and consequences of short-term institutional herding," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1676-1686.
    5. Omar Masood & Bora Aktan & Sahil Chaudhary, 2009. "The investment decision-making process from a risk manager's perspective: a survey," Qualitative Research in Financial Markets, Emerald Group Publishing, vol. 1(2), pages 106-120, June.
    6. Moatemri Ouarda & Abdelfatteh El Bouri & Olivero Bernard, 2013. "Herding Behavior under Markets Condition: Empirical Evidence on the European Financial Markets," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 214-228.
    7. Wermers, Russ, 2006. "Performance evaluation with portfolio holdings information," The North American Journal of Economics and Finance, Elsevier, vol. 17(2), pages 207-230, August.
    8. Franck, Alexander & Walter, Andreas, 2012. "Portfolio Complexity and Herd Behavior: Evidence from the German Mutual Fund Market," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62015, Verein für Socialpolitik / German Economic Association.
    9. Choi, Nicole & Sias, Richard W., 2009. "Institutional industry herding," Journal of Financial Economics, Elsevier, vol. 94(3), pages 469-491, December.
    10. Liao, Tsai-Ling & Huang, Chih-Jen & Wu, Chieh-Yuan, 2011. "Do fund managers herd to counter investor sentiment?," Journal of Business Research, Elsevier, vol. 64(2), pages 207-212, February.
    11. Uchida, Hirofumi & Nakagawa, Ryuichi, 2007. "Herd behavior in the Japanese loan market: Evidence from bank panel data," Journal of Financial Intermediation, Elsevier, vol. 16(4), pages 555-583, October.
    12. Daniel Dorn & Gur Huberman & Paul Sengmueller, 2005. "Correlated Trading and Returns," DNB Working Papers 072, Netherlands Central Bank, Research Department.
    13. Dalia El-Shiaty & Ahmed Abdelmotelib Badawi, 2014. "Herding Behavior in the Stock Market: An Empirical Analysis of the Egyptian Exchange," Working Papers 37, The German University in Cairo, Faculty of Management Technology.
    14. Jo-Hui Chen, 2010. "Gender difference and job replacement for mutual fund," Quality & Quantity: International Journal of Methodology, Springer, vol. 44(4), pages 661-671, June.
    15. Carlos F. Alves & João Vaz Nunes & Ana Paula Serra, 2014. "Analysis of European Equity Funds Preferences for Stock Characteristics," FEP Working Papers 533, Universidade do Porto, Faculdade de Economia do Porto.
    16. Venezia, Itzhak & Nashikkar, Amrut & Shapira, Zur, 2011. "Firm specific and macro herding by professional and amateur investors and their effects on market volatility," Journal of Banking & Finance, Elsevier, vol. 35(7), pages 1599-1609, July.
    17. Gavriilidis, Konstantinos & Kallinterakis, Vasileios & Ferreira, Mario Pedro Leite, 2013. "Institutional industry herding: Intentional or spurious?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 192-214.
    18. Itzhak Venezia & Amrut Nashikkar & Zur Shapira, 2011. "Firm specific and macro herding by professional and amateur investors and their effects on market volatility," Discussion Paper Series dp586, The Center for the Study of Rationality, Hebrew University, Jerusalem.

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