Institutional herding and investor sentiment

Xu Guo, Chen Gu, Chengping Zhang and Shenru Li

Journal of Financial Markets, 2024, vol. 68, issue C

Abstract: We investigate the role of investor sentiment in institutional herding behavior and its impact on stock prices. We find that institutional investors exhibit more herding behavior during periods of high sentiment, which has a significant impact on stock prices. Our results show that herding has a stabilizing effect on the stock market when investor sentiment is low, while it causes price distortions when sentiment is high. We also show that the impact of sentiment on price is particularly pronounced for small, non-profitable, low tangibility, high-growth firms.

Keywords: Institutional herding; Investor sentiment; Stock market; Price impact; Stabilizing effect (search for similar items in EconPapers)
JEL-codes: G23 G40 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:68:y:2024:i:c:s1386418124000090

DOI: 10.1016/j.finmar.2024.100891

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