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Institutional herding and risk–return relationship

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  • Huang, Teng-Ching
  • Wu, Ching-Chih
  • Lin, Bing-Huei

Abstract

This study investigates the impact of institutional herding on the relationship between risk and return. The important findings are as follows. First, the results show that if the multiple regression analysis of risk–return relationship does not consider institutional herding, the relationship is weak. Second, the behavior of institutional investors can link to an explanation for the risk–return relationship, especially foreign institutional investors. Third, the empirical evidence supports the effect of quintile ranking of institutional herding on the risk–return relationship, suggesting that the stronger the institutional herding, the greater the explanatory power for the risk–return relationship. Finally, qualitative comparative analysis supports the multiple regression analysis findings.

Suggested Citation

  • Huang, Teng-Ching & Wu, Ching-Chih & Lin, Bing-Huei, 2016. "Institutional herding and risk–return relationship," Journal of Business Research, Elsevier, vol. 69(6), pages 2073-2080.
    • Handle: RePEc:eee:jbrese:v:69:y:2016:i:6:p:2073-2080
    DOI: 10.1016/j.jbusres.2015.12.011
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    7. Jimnee Deka & Meghna Sharma & Nishant Agarwal & Kamesh Tiwari, 2023. "Linking ESG-Investing Consciousness, Behavioral Biases, and Risk-Perception: Scale Validation with Specifics of Indian Retail Investors," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 9(1), pages 70-91.
    8. Ibrahim Filiz & Thomas Nahmer & Markus Spiwoks & Kilian Bizer, 2018. "Portfolio diversification: the influence of herding, status-quo bias, and the gambler’s fallacy," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 32(2), pages 167-205, May.

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