Differences in herding: Individual vs. institutional investors

Using a trading volume-based measure, we study the differences between institutional and individual investors in herding. First, better-informed institutional investors trade more selectively, whereas less-informed individuals allocate their investments evenly across stocks. Second, individual investors rely more on public information for their trades as they are influenced by market sentiment and attention-grabbing events. Third, institutional investors react asymmetrically to up- and down-market movements, whereas individual investors do not. Finally, despite these differences in herding both individual and institutional investors pay close attention to one another's trades in forming a consensus.