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The Price Impact of Same- and Opposing-Direction Herding by Institutions with Different Investment Horizons

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  • Iqbal, Muhammad Sabeeh
  • Salih, Aslihan
  • Akdeniz, Levent

Abstract

This paper examines the price impact of the herding behaviour of short- and long-horizon institutional investors. We categorize the institutional herding as same-side herding when both types of institutions herd on the buy-side or sell- side together and as opposite-side herding when short-horizon institutions buy while the long-horizon institutions sell or vice versa. We find that the previously documented destabilizing impact of long-horizon institutional herding is only observed on opposite-side herding. Moreover, short-horizon institutional herding improves the stock price discovery process confirming the belief that they are more informed.

Suggested Citation

  • Iqbal, Muhammad Sabeeh & Salih, Aslihan & Akdeniz, Levent, 2021. "The Price Impact of Same- and Opposing-Direction Herding by Institutions with Different Investment Horizons," Finance Research Letters, Elsevier, vol. 40(C).
    • Handle: RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320302592
    DOI: 10.1016/j.frl.2020.101692
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    Cited by:

    1. Lu, Shuai & Li, Shouwei, 2023. "Is institutional herding efficient? Evidence from an investment efficiency and informational network perspective," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).

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    More about this item

    Keywords

    Long-Term Returns; Institutional Herding; Investment Horizon;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • N2 - Economic History - - Financial Markets and Institutions

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