Pension Fund Herding and Stock Returns
64 Pages Posted: 24 Jan 2011 Last revised: 24 Feb 2012
There are 2 versions of this paper
Pension Fund Herding and Stock Returns
Pension Fund Trading and Stock Returns
Date Written: November 21, 2011
Abstract
Pension funds have greater fiduciary responsibilities than mutual funds and are also more severely punished for poor performance. Thus pension funds may find it particularly risky to deviate from peers. Consistent with this view, we find that pension funds herd and that their herding negatively forecasts stock returns. In contrast, we find no evidence that herding by mutual funds or investment advisors leads to price reversals. Moreover, we identify managers who trade on behalf of both pension plan sponsors and other clients and find their trading on behalf of plan sponsors is significantly less informative than their other trading.
Keywords: Pension Funds, Herding, Stock Returns, Institutional Trading
JEL Classification: G11, G12, G23
Suggested Citation: Suggested Citation
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