Herding of institutional traders: New evidence from daily data

Stephanie Kremer

No 2010/23, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: 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.

Keywords: Investor Behavior; Institutional Trading; Stock Prices (search for similar items in EconPapers)
JEL-codes: C23 G11 G24 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:201023

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