Leading the herd: evidence from mutual funds’ buy and sell decisions
Marius Popescu and
Zhaojin Xu ()
Additional contact information
Marius Popescu: Northeastern University
Zhaojin Xu: University of Massachusetts Dartmouth
Review of Quantitative Finance and Accounting, 2018, vol. 50, issue 4, No 6, 1146 pages
Abstract:
Abstract This article investigates whether a mutual fund’s performance is related to its herding behavior. Using the methodology of Sias (Rev Finance Stud 17:165–206, 2004), we develop a measure to capture the magnitude that a fund’s buy (sell) decisions are leading other funds’ buys (sells), and find that a fund’s performance is positively (negatively) related to its “buy leading” (“sell leading”). We interpret these findings as evidence that “buy leaders” (“sell leaders”)’ performance benefits (suffers) from the positive (negative) price effect associated with buy (sell) herds. Additionally, we find a positive relationship between fund performance and valuation-motivated “buy leading”, while we find weak evidence on the relationship between performance and valuation-motivated “sell leading”. We interpret these results as evidence that leading funds’ outperformance is due, in part, to their ability to value stocks.
Keywords: Herding; Mutual funds; Performance; Valuation ability (search for similar items in EconPapers)
JEL-codes: G11 G14 G23 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
http://link.springer.com/10.1007/s11156-017-0656-7 Abstract (text/html)
Access to full text is restricted to subscribers.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:50:y:2018:i:4:d:10.1007_s11156-017-0656-7
Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2
DOI: 10.1007/s11156-017-0656-7
Access Statistics for this article
Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee
More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().