The Price Impact of Same- and Opposing-Direction Herding by Institutions with Different Investment Horizons

Muhammad Sabeeh Iqbal, Aslihan Salih and Levent Akdeniz

Finance Research Letters, 2021, vol. 40, issue C

Abstract: This paper examines the price impact of the herding behaviour of short- and long-horizon institutional investors. We categorize the institutional herding as same-side herding when both types of institutions herd on the buy-side or sell- side together and as opposite-side herding when short-horizon institutions buy while the long-horizon institutions sell or vice versa. We find that the previously documented destabilizing impact of long-horizon institutional herding is only observed on opposite-side herding. Moreover, short-horizon institutional herding improves the stock price discovery process confirming the belief that they are more informed.

Keywords: Long-Term Returns; Institutional Herding; Investment Horizon (search for similar items in EconPapers)
JEL-codes: G1 G2 M1 M2 N2 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320302592

DOI: 10.1016/j.frl.2020.101692

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