Positive Trading Effects and Herding Behavior in Asian Markets: Evidence from Mutual Funds

Abstract:     
Many studies on mutual funds have demonstrated the existence of herding behavior and positive feedback trading. However, most research has not examined the characteristics of herding behavior, but simply attempted to determine if herding behavior exists. These studies fail to probe into the actual causes behind herding behavior. The current study fills this gap in the literature. The study is based on the herding definition of Bikhchndani and Sarma (2001) and examines Asian country mutual funds with a six-year sample period. We examine if there are “Buy high, sell low”, “Buy previous winners, sell previous losers”, “positive feedback trading,” and “herding behavior” in global mutual funds. We also explore the possible factors behind these phenomena.

Number of Pages in PDF File: 12

Keywords: Mutual fund, positive feedback effect, herding, financial crisis, behavioral finance

JEL Classification: C30, G01, G15

Accepted Paper Series