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Do mutual funds herd in industries?

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  • Celiker, Umut
  • Chowdhury, Jaideep
  • Sonaer, Gokhan

Abstract

This study examines whether mutual funds herd in industries and the extent to which such herding impacts industry valuations. Using two herding measures proposed by Lakonishok et al. (1992) and Sias (2004) we document that mutual funds herd in industries. We show that industry herding is not driven by fund flows and that it is not a manifestation of individual stock herding. We also find evidence indicating that herding in industries by mutual funds is related to the industry momentum phenomenon first documented by Moskowitz and Grinblatt (1999), but it does not drive industry valuations away from their fundamentals.

Suggested Citation

  • Celiker, Umut & Chowdhury, Jaideep & Sonaer, Gokhan, 2015. "Do mutual funds herd in industries?," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 1-16.
    • Handle: RePEc:eee:jbfina:v:52:y:2015:i:c:p:1-16
    DOI: 10.1016/j.jbankfin.2014.11.006
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    More about this item

    Keywords

    Herding; Mutual funds; Industry momentum;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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