Determinants of the Herding Behavior of Domestic Fund Manager
Date Issued
2013
Date
2013
Author(s)
Wu, Chieh-Yuan
Abstract
This study investigates the influence of the investor sentiment on fund manager herding. We use Taiwan mutual funds as the study objects, while the study period of the article is from January 31, 2008 to May 31, 2013. This paper provides a direct, empirical examination on this expectation. We apply trinomial distribution approach to measure manager herding, and employ the principal component analysis as means of extracting composite unobserved sentiment measures. The main findings of the results are as follows: (1) There is a positive relationship between investor sentiment and herding measure and sell herding measure, binomial distribution, trinomial distribution, and for those that fell behind one or two phrases, the results are identical. This means that when investors have more confidence in the future, fund managers will herd more; (2) There are positive relationships between all fund managers’ return standard deviation in the previous month and number of managers trading and herding measure, buy herding measure and sell herding measure, so the results of binomial distribution and trinomial distribution are identical. This means that when all fund managers’ return standard deviations become smaller, the information that everyone obtains is about the same, therefore, they will comparatively not herd. On the contrary, which means that the possessed information is not identical, because of reputation, the one with information that falls behind will have more motivation to herd. The result also shows that when the stock’s number of managers trading increases, herding behavior will be more significant. This conclusion supports the study results of Wermers (1999), Sam Wylie (2005); (3) There are negative relationships between the company size and herding measure, buy herding measure and sell herding measure, while the results of binomial distribution and trinomial distribution are identical. Smaller sized companies’ information exposure is usually incomplete, so it is easy for fund managers to have uncertainty towards these companies. When the stock price rises, investors will be afraid that they cannot buy the stock. When the stock price drops, they will be afraid that they cannot sell it. Therefore, it always forces fund managers to follow the part of the fund managers and then produces the operating tactic of herding; (4) There is a positive relationship between PDR (the current month’s fund purchase ratio subtracting redemption ratio) and buy herding measure, while its relationship with sell herding measure is negative, which shows that fund investors’ large amount of purchase and large amount of redemption will force the fund manager to raise the quota of holding stocks, and sell the holding stocks, respectively.
Subjects
投資人情緒
基金經理人
從眾
Type
thesis
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