An empirical study on the Herding Behavior of Taiwan Mutual Fund Managers
Date Issued
2009
Date
2009
Author(s)
Mao, Tsung-Yi
Abstract
Once mutual fund managers make investment decisions, they have to face fund performance and profession challenge and procured the behavior of buying or selling in the same stock at the same time. The purpose of this paper is to examine the herding behavior of fund managers in Taiwan by using a trinomial distribution method, extended from the traditional binomial distribution one. The trinomial distribution method considers three trade directions, namely buy, sell and hold.he empirical results show that Taiwan mutual fund managers have significant herding behavior, and buy-herding behavior is more significant than sell-herding behavior. The binomial distribution may overestimate the herding behavior owing to ignoring the trade direction - hold. The herding behavior is closely related to the firm size, current-stock returns and mutual fund performance. First, the detected level of herding is higher for the smallest and biggest size stock. Second, buy-herding is strong in high current-return stocks and sell-herding is strong in low current-return stocks. Third, managers tend to herd in funds with the worst performance based on reputation.
Subjects
Herding Behavior
Mutual Fund
Hold
Type
thesis
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