A Note on the Technology Herd: Evidence from Large Institutional Investors

Review of Behavioral Finance, Forthcoming

17 Pages Posted: 20 Mar 2018

See all articles by Esin Cakan

Esin Cakan

University of New Haven - Economics

Riza Demirer

Southern Illinois University Edwardsville - Department of Economics & Finance; Economic Research Forum (ERF)

Rangan Gupta

University of Pretoria - Department of Economics

Josine Uwilingiye

University of Johannesburg

Date Written: March 14, 2018

Abstract

This paper examines intentional herding among institutional investors with a particular focus on the technology sector that was the driver of the “New Economy” in the United States during the dot-com bubble of the 1990s. Using data on technology stockholdings of 115 large institutional investors, we test the presence of herding by examining linear dependence and feedback between individual investors’ technology stockholdings and that of the aggregate market. Unlike other models to detect herding, we use Geweke (1982) type causality tests that allow us to disentangle spurious herding from intentional herding via tests of bidirectional and instantaneous causality across portfolio positions in technology stocks. After controlling information based (spurious) herding, our tests show that 38 percent of large institutional investors tend to intentionally herd in technology stocks. The findings support the existing literature that investment decisions by large institutional investors are not only driven by fundamental information, but also by cognitive bias that is characterized by intentional herding.

Keywords: Herding, Institutional investors, Causality, Technology stocks

JEL Classification: G02, G11, G14, C18

Suggested Citation

Cakan, Esin and Demirer, Riza and Gupta, Rangan and Uwilingiye, Josine, A Note on the Technology Herd: Evidence from Large Institutional Investors (March 14, 2018). Review of Behavioral Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3140970

Esin Cakan (Contact Author)

University of New Haven - Economics ( email )

300 Boston Post Road
West Haven, CT 06516
United States

HOME PAGE: http://www.newhaven.edu/Faculty-Staff-Profiles/Esin-Cakan/

Riza Demirer

Southern Illinois University Edwardsville - Department of Economics & Finance ( email )

Department of Economics & Finance
Alumni Hall 3144
Edwardsville, IL 62026-1102
United States
(618) 650-2939 (Phone)
(618) 650-3047 (Fax)

HOME PAGE: http://www.siue.edu/~rdemire/

Economic Research Forum (ERF)

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Cairo, Cairo
Egypt

HOME PAGE: http://erf.org.eg/affiliates/riza-demirer-3/

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Josine Uwilingiye

University of Johannesburg ( email )

P.O. Box 524
Auckland Park 2006, Johannesburg
South Africa

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
34
Abstract Views
241
PlumX Metrics