Does herding behavior reveal skill? An analysis of mutual fund performance
Hao Jiang and
FMG Discussion Papers from Financial Markets Group
This paper ?nds that fund herding, de?ned as the tendency of a mutual fund to follow past aggregate institutional trades, is an important predictor of mutual fund performance. Examining actively managed U.S. equity mutual funds over the period 1990-2009, we ?nd that funds with a higher herding tendency achieve lower future returns. The performance gap between herding and antiherding funds is persistent over various horizons and is more pronounced in periods of greater investment opportunities in the active management industry. We show that fund herding is negatively correlated with recently developed measures of mutual fund skill and provides distinct information for the predictability of mutual fund performance. Overall, our results suggest that fund herding reveals information about the cross-sectional distribution of skill in the mutual fund industry.
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://www.lse.ac.uk/fmg/researchProgrammes/paulWo ... pers/dp720-PWC35.pdf (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fmg:fmgdps:dp720
Access Statistics for this paper
More papers in FMG Discussion Papers from Financial Markets Group
Bibliographic data for series maintained by The FMG Administration ().