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Differences in herding: Individual vs. institutional investors

Wei Li, Ghon Rhee and Steven Shuye Wang

Pacific-Basin Finance Journal, 2017, vol. 45, issue C, 174-185

Abstract: 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.

Keywords: Herding; Individual and institutional trading volumes; Information asymmetry; Market returns (search for similar items in EconPapers)
JEL-codes: G1 G12 G23 (search for similar items in EconPapers)
Date: 2017
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Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

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Handle: RePEc:eee:pacfin:v:45:y:2017:i:c:p:174-185