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The bias in a standard measure of herding

Author

Listed:
  • Raphaëlle Bellando

    () (Laboratoire d''Economie d''Orléans UMR CNRS 7322)

Abstract

We address the Lakonishok, Shleifer and Vishny (LSV) herding measure. Frey, Herbst and Walter (FHW) have shown by empirical simulations that LSV is biased. Using a theoretical model we provide a formal explanation of this bias, and show that a corrected herding measure depends on some unobservable parameters. This suggests that assessing herding intensity with this kind a more difficult task than considered up to now in the empirical literature.

Suggested Citation

  • Raphaëlle Bellando, 2012. "The bias in a standard measure of herding," Economics Bulletin, AccessEcon, vol. 32(2), pages 1537-1544.
  • Handle: RePEc:ebl:ecbull:eb-12-00111
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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I2-P148.pdf
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    References listed on IDEAS

    as
    1. Raphaëlle Bellando, 2010. "Measuring herding intensity: a hard task," Working Papers halshs-00517610, HAL.
    2. Eduardo Borensztein & R. Gaston Gelos, 2003. "A Panic-Prone Pack? The Behavior of Emerging Market Mutual Funds," IMF Staff Papers, Palgrave Macmillan, vol. 50(1), pages 1-3.
    3. Lakonishok, Josef & Shleifer, Andrei & Vishny, Robert W., 1992. "The impact of institutional trading on stock prices," Journal of Financial Economics, Elsevier, vol. 32(1), pages 23-43, August.
    4. Hwang, Soosung & Salmon, Mark, 2004. "Market stress and herding," Journal of Empirical Finance, Elsevier, vol. 11(4), pages 585-616, September.
    5. Demirer, RIza & Kutan, Ali M., 2006. "Does herding behavior exist in Chinese stock markets?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(2), pages 123-142, April.
    6. Sushil Bikhchandani & Sunil Sharma, 2001. "Herd Behavior in Financial Markets," IMF Staff Papers, Palgrave Macmillan, vol. 47(3), pages 1-1.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Bethke, Sebastian & Kempf, Alexander & Trapp, Monika, 2014. "Investor sentiment, flight-to-quality, and corporate bond comovement," CFR Working Papers 13-06 [rev.], University of Cologne, Centre for Financial Research (CFR).
    2. repec:eee:jbfina:v:82:y:2017:i:c:p:112-132 is not listed on IDEAS
    3. Mohamed El Hedi Arouri & Raphaëlle Bellando & Sébastien Ringuedé & Anne-Gaël Vaubourg, 2013. "Herding in French stock markets: Empirical evidence from equity mutual funds," Post-Print halshs-01066726, HAL.
    4. Bethke, Sebastian & Gehde-Trapp, Monika & Kempf, Alexander, 2014. "Investor sentiment, flight-to-quality, and corporate bond comovement," CFR Working Papers 13-06 [rev.2], University of Cologne, Centre for Financial Research (CFR).
    5. Bethke, Sebastian & Gehde-Trapp, Monika & Kempf, Alexander, 2015. "Investor sentiment, flight-to-quality, and corporate bond comovement," CFR Working Papers 13-06 [rev.3], University of Cologne, Centre for Financial Research (CFR).

    More about this item

    Keywords

    herding; herding measures; fund management;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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