Herd Behavior and Mutual Fund Performance

Management Science, Forthcoming

47 Pages Posted: 22 Feb 2014 Last revised: 27 Sep 2016

See all articles by Andrew Koch

Andrew Koch

University of Pittsburgh - Finance Group

Date Written: November 6, 2015


I develop fund-level measures of the similarity in trading of mutual fund managers, resulting in the identification of leaders, contemporaneously herding managers, and followers. I find evidence of a persistent group of funds whose trades lead the aggregate trades of the mutual fund industry; these leader funds exhibit strong subsequent performance, consistent with informed trading. In contrast, there is no evidence that managers that trade together, either contemporaneously or with a lag, outperform. These findings suggest that managers of leader funds receive in advance private signals regarding the information upon which other funds focus.

Keywords: Mutual fund herding, Informed trading, Career concerns

JEL Classification: G23

Suggested Citation

Koch, Andrew, Herd Behavior and Mutual Fund Performance (November 6, 2015). Management Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2399181 or http://dx.doi.org/10.2139/ssrn.2399181

Andrew Koch (Contact Author)

University of Pittsburgh - Finance Group ( email )

372 Mervis Hall
Pittsburgh, PA 15260
United States

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