Article ID Journal Published Year Pages File Type
7364853 Journal of International Financial Markets, Institutions and Money 2014 38 Pages PDF
Abstract
This paper proposes a methodological improvement to empirical studies of herd behavior based on investor transactions. By developing a simple model of trading behavior, we show that the traditionally used herding measure produces biased results. As this bias depends on characteristics of the data, it also affects the robustness of previous findings. We derive a new measure that is unbiased and shows superior statistical properties for data sets commonly used. In an analysis of the German mutual fund market, our measure provides new insights into fund manager herding that would have been undetected under the traditional statistic.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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