Herding in Smart-Beta Investment Products

Eduard Krkoska and Klaus Schenk-Hoppé
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Eduard Krkoska: Department of Economics, School of Social Sciences, University of Manchester, Manchester M13 9PL, UK

JRFM, 2019, vol. 12, issue 1, 1-14

Abstract: We highlight herding of investors as one major risk factor that is typically ignored in statistical approaches to portfolio modelling and risk management. Our survey focuses on smart-beta investing where such methods and investor herding seem particularly relevant but its negative effects have not yet come to the fore. We point out promising and novel approaches of modelling herding risk which merit empirical analysis. This financial economists’ perspective supplements the vast statistical exploration of implementing factor strategies.

Keywords: herding; factor investing; risk (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (7)

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