Herding Behavior among Exchange-Traded Funds

Gerasimos G. Rompotis

Journal of Behavioral Finance, 2018, vol. 19, issue 4, 483-497

Abstract: The author examines whether the trading behavior of exchange-traded funds (ETFs) is biased by any herding effect. Return data of a sample of 66 and 34 large-cap and small-cap ETFs, respectively, are used over the period 2012–2016 to assess whether these funds herd and whether herding is more pronounced during extreme markets, during down markets, and during days with extreme trading activity and volatility. The results show that herding is not the case for ETFs. However, some evidence is obtained on a decreasing return dispersion among ETFs on days with negative market returns. Trading activity seems not to induce herding. On the contrary, the author obtains evidence that shows that the higher the trading volumes are, the higher the return dispersion among ETFs is. When it comes to herding during highly volatile markets, the author finds that return dispersion among ETFs decreases on days with extremely high intraday volatility. However, when assessing the relationship between return dispersion and volatility without focusing on days with extremely high risk, the author obtains strong evidence of a linear relation between the 2 variables. This contradicting finding suggests that the stronger the intraday volatility in the ETF market is, the wider the dispersion in returns among ETFs is.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://hdl.handle.net/10.1080/15427560.2018.1431886 (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:taf:hbhfxx:v:19:y:2018:i:4:p:483-497

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/hbhf20

DOI: 10.1080/15427560.2018.1431886

Access Statistics for this article

Journal of Behavioral Finance is currently edited by Brian Bruce

More articles in Journal of Behavioral Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().