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Mutual fund herding and performance: Evidence from China

Author

Listed:
  • Fan, Yaoyao
  • Song, Qinhao
  • Guan, Rong
  • Ly, Kim Cuong
  • Jiang, Yuxiang

Abstract

We investigate the impact of mutual fund herding on fund performance. Using a novel and dynamic measure of fund-level herding that captures the tendency of a fund manager to imitate the trading decisions of the institutional crowd based on a sample of 3490 mutual funds in China for 21 years between 2003 and 2023, we find that mutual fund herding is negatively related to fund performance. Our empirical results still hold when we employ a battery of methods to mitigate endogeneity issues. Additionally, we find that herding behavior becomes more detrimental to performance when the portfolio managers are older, male and more experienced.

Suggested Citation

  • Fan, Yaoyao & Song, Qinhao & Guan, Rong & Ly, Kim Cuong & Jiang, Yuxiang, 2024. "Mutual fund herding and performance: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 95(PC).
    • Handle: RePEc:eee:finana:v:95:y:2024:i:pc:s1057521924004356
    DOI: 10.1016/j.irfa.2024.103503
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    More about this item

    Keywords

    Mutual fund performance; Herding; China;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

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