Mutual fund herding its impact on stock returns: Evidence from the Taiwan stock market

Weifeng Hung, Chia Chi Lu, Cheng F. Lee

Research output: Contribution to journalArticlepeer-review

38 Scopus citations

Abstract

Using quarterly ownership data which identify identity codes of mutual funds in Taiwan, we investigate mutual fund herding and its impact on stock price. We show that mutual funds tend to follow their own steps in trading rather than follow trades made by other funds. More importantly, evidence of price continuation following mutual fund herd buying suggests that such herding is based on value-relevant information and is consistent with the investigative herding hypothesis. Alternatively, evidence of return reversal following mutual fund herd selling suggests that such herding is non-informational and is consistent with the characteristic herding hypothesis.

Original languageEnglish
Pages (from-to)477-493
Number of pages17
JournalPacific Basin Finance Journal
Volume18
Issue number5
DOIs
StatePublished - Nov 2010

Keywords

  • Feedback trading
  • Herding
  • Institutional trading
  • Mutual funds

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