Herd Behavior and Mutual Fund Performance

Andrew Koch ()
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Andrew Koch: Joseph M. Katz Graduate School of Business, University of Pittsburgh, Pittsburgh, Pennsylvania 15260

Management Science, 2017, vol. 63, issue 11, 3849-3873

Abstract: I develop fund-level measures of the similarity in trading of mutual fund managers, resulting in the identification of leaders, contemporaneously herding managers, and followers. I find evidence of a persistent group of funds whose trades lead the aggregate trades of the mutual fund industry; these leader funds exhibit strong subsequent performance, consistent with informed trading. By contrast, there is no evidence that managers that trade together, either contemporaneously or with a lag, outperform. These findings suggest that managers of leader funds receive in advance private signals regarding the information upon which other funds focus.

Keywords: mutual fund herding; informed trading; career concerns (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:63:y:2017:i:11:p:3849-3873

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