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Herding behaviour in strategic asset allocations: new approaches on quantitative and intertemporal imitation

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  • Laura Andreu
  • Cristina Ortiz
  • Jose Luis Sarto

Abstract

In this article, we contribute to financial literature on institutional herding behaviour, intertemporal imitation and informational cascades by analysing the changes in the strategic asset allocations of Spanish equity pension plans investing in Eurozone equities. This article is mainly focused on methodological improvements. Firstly, the study examines the herding phenomenon by using the traditional measure developed by Lakonishok, Shleifer and Vishny (LSV) (1992). Afterwards, some original analyses such as the consideration of a restricted definition of buying and selling and the amount of the variations in the strategic allocations are carried out to overcome certain shortcomings existing in this metric. Moreover, we analyse the intertemporal imitation and the informational cascades through time-series regressions. The results show that Spanish pension managers are involved in herd behaviour, a phenomenon that is reinforced when important movements of the strategic allocations are required. Intertemporal analyses confirm the convergent behaviour of a significant number of pension plans; while the study of informational cascades allows us to discriminate between those plans that present anticipatory abilities and those that follow the strategic movements of the rest of the managers.

Suggested Citation

  • Laura Andreu & Cristina Ortiz & Jose Luis Sarto, 2009. "Herding behaviour in strategic asset allocations: new approaches on quantitative and intertemporal imitation," Applied Financial Economics, Taylor & Francis Journals, vol. 19(20), pages 1649-1659.
  • Handle: RePEc:taf:apfiec:v:19:y:2009:i:20:p:1649-1659
    DOI: 10.1080/09603100903018786
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    Cited by:

    1. Pegah Dehghani & Ros Zam Zam Sapian, 2014. "Sectoral herding behavior in the aftermarket of Malaysian IPOs," Venture Capital, Taylor & Francis Journals, vol. 16(3), pages 227-246, July.
    2. repec:eco:journ1:2017-02-85 is not listed on IDEAS
    3. Frey, Stefan & Herbst, Patrick & Walter, Andreas, 2014. "Measuring mutual fund herding – A structural approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 219-239.

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