Institutional industry herding |
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| Authors: | Nicole Choi Richard W. Sias |
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| Affiliation: | 1. Department of Economics and Finance, College of Business, University of Wyoming, Laramie, WY 82071, USA;2. Department of Finance, Insurance and Real Estate, College of Business, Washington State University, Pullman, WA 99164-4746, USA |
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| Abstract: | We examine whether institutional investors follow each other into and out of the same industries. Our empirical results reveal strong evidence of institutional industry herding. The cross-sectional correlation between the fraction of institutional traders buying an industry this quarter and the fraction buying last quarter, for example, averages 40%. Additional tests suggest that correlated signals primarily drive institutional industry herding. Our results also provide empirical support for “style investing” models. |
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| Keywords: | G11 G14 G24 |
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