Institutional herding and risk–return relationship

This study investigates the impact of institutional herding on the relationship between risk and return. The important findings are as follows. First, the results show that if the multiple regression analysis of risk–return relationship does not consider institutional herding, the relationship is weak. Second, the behavior of institutional investors can link to an explanation for the risk–return relationship, especially foreign institutional investors. Third, the empirical evidence supports the effect of quintile ranking of institutional herding on the risk–return relationship, suggesting that the stronger the institutional herding, the greater the explanatory power for the risk–return relationship. Finally, qualitative comparative analysis supports the multiple regression analysis findings.