Risk Management, Rational Herding and Institutional Investors: A Macro View
AbstractAs institutional investors are engaged to realize attractive risk-adjusted returns, they can by definition be seen as risk managers. This paper analyzes their risk management behavior from a macro perspective and focuses on their incentives for rational herding. Based on a questionnaire survey we find clear evidence of herding among fund managers in Germany. While all different subgroups of fund managers perceive institutional herding, senior fund managers perceive herding even more strongly than more junior managers. Regarding herding as rational strategy of adapting to incentives, one might ascribe this finding to the higher pressure of success that senior managers face.
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Bibliographic InfoPaper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-285.
Length: 20 pages
Date of creation: Oct 2003
Date of revision:
Institutional investors; herd behavior; momentum strategy;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
This paper has been announced in the following NEP Reports:
- NEP-FIN-2003-10-05 (Finance)
- NEP-FMK-2003-10-05 (Financial Markets)
- NEP-RMG-2003-10-05 (Risk Management)
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