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Appears in Collections:Accounting and Finance Working Papers
Title: Measuring Mutual Fund Herding - A Structural Approach
Author(s): Frey, Stefan
Herbst, Patrick
Walter, Andreas
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Citation: Frey S, Herbst P & Walter A (2012) Measuring Mutual Fund Herding - A Structural Approach. SSRN Working Paper Series. Social Science Research Network.
Keywords: Herding
LSV measure
mutual funds
trading behavior
JEL Code(s): G11
Issue Date: 27-Jun-2012
Publisher: Social Science Research Network
Series/Report no.: SSRN Working Paper Series
Abstract: This paper proposes a methodological improvement to empirical studies of herd behavior based on investor transactions. By developing a simple model of trading behavior, we show that the traditionally used herding measure produces biased results. As this bias depends on characteristics of the data, it also affects the robustness of previous findings. We derive a new measure that is unbiased and shows superior statistical properties for data sets commonly used. In an analysis of the German mutual fund market, our measure provides new insights into fund manager herding that would have been undetected under the traditional statistic.
Type: Working or Discussion Paper
Rights: Author retains copyright.
Affiliation: Leibniz University of Hanover
Accounting and Finance
Giessen University

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