Herding of institutional traders: New evidence from daily data
This paper sheds new light on herding of institutional investors by using a unique database that identifies every transaction made by financial institutions in the German stock market. First, the analysis reveals that herding behavior of institutions occurs daily. Second, replication of the analysis with low-frequency and anonymous transaction data indicates that previous studies overestimate herding. Third, our results suggest that herding by large financial institutions mainly results from shared preference and investment styles. Fourth, a panel analysis shows that herding on the sell side in stocks is positively related to past returns and past volatility, whereas herding on the buy side is negatively related to these variables. Hence, large financial institutions do not demonstrate positive feedback strategies.
|Date of creation:||2010|
|Date of revision:|
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- J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1989.
"Positive Feedback Investment Strategies and Destabilizing Rational Speculation,"
NBER Working Papers
2880, National Bureau of Economic Research, Inc.
- De Long, J Bradford, et al, 1990. " Positive Feedback Investment Strategies and Destabilizing Rational Speculation," Journal of Finance, American Finance Association, vol. 45(2), pages 379-95, June.
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