Risk Management, Rational Herding and Institutional Investors: A Macro View

Torben Lütje and Lukas Menkhoff
Authors registered in the RePEc Author Service: Torben Luetje (torben.luetje@db.com)

Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät

Abstract: As institutional investors are engaged to realize attractive risk-adjusted returns, they can by definition be seen as risk managers. This paper analyzes their risk management behavior from a macro perspective and focuses on their incentives for rational herding. Based on a questionnaire survey we find clear evidence of herding among fund managers in Germany. While all different subgroups of fund managers perceive institutional herding, senior fund managers perceive herding even more strongly than more junior managers. Regarding herding as rational strategy of adapting to incentives, one might ascribe this finding to the higher pressure of success that senior managers face.

Keywords: Institutional investors; herd behavior; momentum strategy (search for similar items in EconPapers)
JEL-codes: G14 G23 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2003-10
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-rmg
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http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-285.pdf (application/pdf)

Related works:
Chapter: Risk Management, Rational Herding and Institutional Investors: A Macro View (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:han:dpaper:dp-285

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