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Herding by institutional investors: empirical evidence from French mutual funds

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  • Mohamed El Hedi Arouri

    ()
    (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans, EconomiX - CNRS : UMR7166 - Université de Paris X - Nanterre)

  • Raphaëlle Bellando

    ()
    (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans)

  • Sébastien Ringuedé

    ()
    (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans)

  • Anne-Gaël Vaubourg

    ()
    (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans)

Abstract

In this paper, we use the traditional herding measure of Lakonishok, Shleifer and Vishny (1992) (LSV indicator) and a more recent measure by Frey, Herbst and Walter (2007) (FHW indicator) in order to assess the intensity of herding by French equity mutual funds and to compare it to institutional herding in other stock markets. We show that when measured with the LSV indicator, institutional herding by French equity funds amounts to 6.5%, which is larger than those reported by other empirical studies on developed stock markets. Our ndings also suggest that herding does not monotonically rises with the number of investors trading on a stock-quarter. We also obtain that FHW herding levels are about 2.5 times stronger than those obtained with the traditional LSV measure. Our other results are consistent with those reported by most previous works on developed stock markets. In particular, we observe that herding is stronger in small capitalization than in medium and large capitalization. Moreover herding turns out to be more severe among foreign stocks than among UE-15 or French stocks. Finally, French institutional investors practice feedback strategies: they buy past winners and sell past losers

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number hal-00507832.

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Date of creation: 01 Aug 2010
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Handle: RePEc:hal:wpaper:hal-00507832

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