Mutual Fund Herding in Taiwan

39 Pages Posted: 3 Oct 2011

See all articles by Tony Chieh-tse Hou

Tony Chieh-tse Hou

National Dong Hwa University

Phillip J. McKnight

University of Wisconsin - Milwaukee

Charlie Weir

Robert Gordon University - Aberdeen Business School

Date Written: September 15, 2011

Abstract

This paper analyzes the trading activity of Taiwanese open-end equity mutual fund herding behaviour over the period of 1996 to 2008. We employ the herding measure suggested by Wermers (1999) and find strong evidence of both directional and directionless herding activities, and also of positive feedback trading by mutual fund managers in Taiwan. Our results show a stronger tendency to herd among growth stocks, along with a high level of sell-side herding in value stocks. Moreover, we also find the importance of turnover ratio and price-earnings ratio in determining the directional herding activities. Finally, consistent with previous studies, we find this herding behaviour neither destabilises nor stabilises to stock prices.

Keywords: Herding behaviour; Open-end equity mutual fund; Taiwan.

JEL Classification: G12; G14; G15

Suggested Citation

Hou, Tony Chieh-tse and McKnight, Phillip J. and Weir, Charles, Mutual Fund Herding in Taiwan (September 15, 2011). Available at SSRN: https://ssrn.com/abstract=1928086 or http://dx.doi.org/10.2139/ssrn.1928086

Tony Chieh-tse Hou

National Dong Hwa University ( email )

No. 1, Sec. 2, Da Hsueh Rd.
Shoufeng
Hualien, 97401
Taiwan

HOME PAGE: http://faculty.ndhu.edu.tw/~tonycthou/

Phillip J. McKnight (Contact Author)

University of Wisconsin - Milwaukee ( email )

Milwaukee, WI
United States

Charles Weir

Robert Gordon University - Aberdeen Business School ( email )

Garthdee Road
RGU
Aberdeen AB10 7QE
United Kingdom
0044 1224 263800 (Phone)
0044 1224 263838 (Fax)

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