Exploring Style Herding by Mutual Funds

Journal of International Financial Markets, Institutions & Money

38 Pages Posted: 15 Jun 2017 Last revised: 21 Mar 2023

See all articles by Caterina Santi

Caterina Santi

University of Liège - HEC Liège

Remco C. J. Zwinkels

Vrije Universiteit Amsterdam; Tinbergen Institute

Multiple version iconThere are 2 versions of this paper

Date Written: April 21, 2023

Abstract

We study intentional herding in investment styles by mutual funds, and its consequences. We find that style herding is significant and persistent. Herding tends to increase after periods of high market volatility and decrease with sentiment, consistent with the intentional character of herding. Furthermore, we find that herding is related to changes in market dynamics. Finally, we find that herding in certain styles tends to temporarily increase mutual funds' performance, whereas it reduces flows. Overall, the results illustrate that intentional herding in styles is prevalent and has important consequences for market dynamics, fund managers, and investors.

Keywords: herding, mutual funds, style investing, asset pricing

JEL Classification: C32, G12, G23

Suggested Citation

Santi, Caterina and Zwinkels, Remco C.J., Exploring Style Herding by Mutual Funds (April 21, 2023). Journal of International Financial Markets, Institutions & Money, Available at SSRN: https://ssrn.com/abstract=2986059 or http://dx.doi.org/10.2139/ssrn.2986059

Caterina Santi (Contact Author)

University of Liège - HEC Liège ( email )

Rue Louvrex 14
Liège, 4000
Belgium

HOME PAGE: http://www.caterinasanti.com

Remco C.J. Zwinkels

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, NH 1081 HV
Netherlands
+31205985220 (Phone)

HOME PAGE: http://https://research.vu.nl/en/persons/remco-zwinkels

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

HOME PAGE: http://https://tinbergen.nl/person/1574/remco-zwinkels

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