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To Be Good or To Be Better: Asset Managers Attitudes Towards Herding

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  • Lütje, Torben

Abstract

Based on a questionnaire survey the paper distinguishes between herding asset managers who try to be good and non-herding asset managers who try to be better than their competitors. It provides evidence for reputational herding and discusses herding managers\\\' working effort, preferred sources of information and investment horizon. Additionally, their risk taking behavior including their investment behavior in short-term tournament scenarios is analyzed. It is found that herding managers assess themselves as generally more risk averse than non-herding managers, but in the tournament they are willing to take more risk. This finding is ascribable to their fear of falling out of the herd.

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File URL: http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-297.pdf
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Bibliographic Info

Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-297.

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Length: 25 pages
Date of creation: May 2004
Date of revision:
Handle: RePEc:han:dpaper:dp-297

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Keywords: Institutional investors; herding; risk aversion; tournament hypothesis;

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  1. Guillermo A. Calvo & Enrique G. Mendoza, 1999. "Regional Contagion and the Globalization of Securities Markets," NBER Working Papers 7153, National Bureau of Economic Research, Inc.
  2. Thomas Gehrig & Lukas Menkhoff, 2006. "Extended evidence on the use of technical analysis in foreign exchange," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(4), pages 327-338.
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  5. Goriaev, A.P. & Nijman, T.E. & Werker, B.J.M., 2005. "Yet another look at mutual fund tournaments," Open Access publications from Tilburg University urn:nbn:nl:ui:12-167598, Tilburg University.
  6. Devenow, Andrea & Welch, Ivo, 1996. "Rational herding in financial economics," European Economic Review, Elsevier, vol. 40(3-5), pages 603-615, April.
  7. V. V. Chari & Patrick J. Kehoe, 2003. "Financial crises as herds: overturning the critiques," Staff Report 316, Federal Reserve Bank of Minneapolis.
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  9. Froot, Kenneth A & Scharftstein, David S & Stein, Jeremy C, 1992. " Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation," Journal of Finance, American Finance Association, vol. 47(4), pages 1461-84, September.
  10. Busse, Jeffrey A., 2001. "Another Look at Mutual Fund Tournaments," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(01), pages 53-73, March.
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  12. Brozynski, Torsten & Menkhoff, Lukas & Schmidt, Ulrich, 2003. "The Use of Momentum, Contrarian and Buy-&-Hold Strategies: Survey Evidence from Fund Managers," Hannover Economic Papers (HEP) dp-290, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  13. Mae Baker, 1998. "Fund managers' attitudes to risk and time horizons: the effect of performance benchmarking," The European Journal of Finance, Taylor & Francis Journals, vol. 4(3), pages 257-278.
  14. Sunil Sharma & Sushil Bikhchandani, 2000. "Herd Behavior in Financial Markets: A Review," IMF Working Papers 00/48, International Monetary Fund.
  15. Arnswald, Torsten, 2001. "Investment Behaviour of German Equity Fund Managers," Discussion Paper Series 1: Economic Studies 2001,08, Deutsche Bundesbank, Research Centre.
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  17. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
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