Herding in Smart-Beta Investment Products

29 Pages Posted: 10 Apr 2019

See all articles by Eduard Krkoska

Eduard Krkoska

University of Manchester, Faculty of Humanities, School of Social Sciences, Department of Economics, Students

Klaus Reiner Schenk-Hoppé

University of Manchester - Department of Economics; Norwegian School of Economics (NHH) - Department of Finance

Date Written: March 18, 2019

Abstract

We highlight herding of investors as one major risk factor that is typically ignored in statistical approaches to portfolio modelling and risk management. Our survey focuses on smart-beta investing where such methods and investor herding seem particularly relevant but its negative effects have not yet come to the fore. We point out promising and novel approaches of modelling herding risk which merit empirical analysis. This financial economists' perspective supplements the vast statistical exploration of implementing factor strategies.

Keywords: herding, factor investing, risk

JEL Classification: G12, G14, G40

Suggested Citation

Krkoska, Eduard and Schenk-Hoppé, Klaus Reiner, Herding in Smart-Beta Investment Products (March 18, 2019). Available at SSRN: https://ssrn.com/abstract=3354963 or http://dx.doi.org/10.2139/ssrn.3354963

Eduard Krkoska

University of Manchester, Faculty of Humanities, School of Social Sciences, Department of Economics, Students ( email )

Arthur Lewis Building
Oxford Road
Manchester, M13 9PL
United Kingdom

Klaus Reiner Schenk-Hoppé (Contact Author)

University of Manchester - Department of Economics ( email )

Arthur Lewis Building
Oxford Road
Manchester, M13 9PL
United Kingdom

Norwegian School of Economics (NHH) - Department of Finance ( email )

Helleveien 30
N-5045 Bergen
Norway

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