The Prevalence, Sources, and Effects of Herding
Naomi E. Boyd
West Virginia University; U.S. CFTC
Bank of Canada
Jeffrey H. Harris
Michael S. Haigh
Standard Chartered Bank
February 27, 2013
We test the prevalence, sources and effects of herding among large speculative traders in thirty U.S. futures markets over 2004-2009. Using unique U.S. Commodity Futures Trading Commission (CFTC) data identifying daily trader positions we compare herding among hedge funds and floor market participants and find similar levels of herding across groups at slightly higher levels than in equity markets. We analyze the sources of herding and find that the number of traders, trading volume and floor-based markets are positively associated with herding. Notably, we find that the moderate levels of herding by hedge funds serve to stabilize, rather than destabilize, prices in futures markets.
Number of Pages in PDF File: 37
Keywords: Herding, Hedge Funds, Futures Markets
JEL Classification: G10working papers series
Date posted: March 15, 2009 ; Last revised: February 28, 2013
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