Exploring Style Herding by Mutual Funds

40 Pages Posted: 16 Nov 2022

See all articles by Caterina Santi

Caterina Santi

University of Liège - HEC Liège

Remco C. J. Zwinkels

Vrije Universiteit Amsterdam; Tinbergen Institute

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Abstract

We study intentional herding in investment styles by mutual funds, and its consequences. We find that style herding is significant and persistent, especially for active funds. 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 style herding tends to reduce flows, whereas it does not affect mutual funds’ performance. Overall, the results illustrate that intentional herding in styles is prevalent and has important consequences for both market dynamics and fund managers and investors.

Keywords: herding, Mutual Funds, Asset Pricing

Suggested Citation

Santi, Caterina and Zwinkels, Remco C.J., Exploring Style Herding by Mutual Funds. Available at SSRN: https://ssrn.com/abstract=4272256

Caterina Santi

University of Liège - HEC Liège ( email )

Rue Louvrex 14
Liège, 4000
Belgium

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

Remco C.J. Zwinkels (Contact Author)

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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