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Mutual fund herding and reputational concerns

Author

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  • Marius Popescu

    (Northeastern University)

  • Zhaojin Xu

    (University of Massachusetts Dartmouth)

Abstract

The article examines whether mutual fund managers’ career concerns contribute to their herding behavior. We find that mutual funds herd, on average, 71% more in down markets than in up markets. Furthermore, we find that poorly performing funds herd, on average, 17% more than well performing funds, and that this pattern is the result of poorly performing funds that herd, on average, 110% more in down markets relative to up markets. Our evidence is consistent with the argument that poorly performing managers have stronger career concerns, and particularly so in down markets.

Suggested Citation

  • Marius Popescu & Zhaojin Xu, 2018. "Mutual fund herding and reputational concerns," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 42(3), pages 550-565, July.
    • Handle: RePEc:spr:jecfin:v:42:y:2018:i:3:d:10.1007_s12197-017-9405-y
    DOI: 10.1007/s12197-017-9405-y
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    References listed on IDEAS

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    Cited by:

    1. Gimeno, Ruth & Andreu, Laura & Sarto, José Luis, 2022. "Fund trading divergence and performance contribution," International Review of Financial Analysis, Elsevier, vol. 83(C).
    2. Santi, Caterina & Zwinkels, Remco C.J., 2023. "Exploring style herding by mutual funds," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 85(C).
    3. Puput Tri Komalasari & Marwan Asri & Bernardinus M. Purwanto & Bowo Setiyono, 2022. "Herding behaviour in the capital market: What do we know and what is next?," Management Review Quarterly, Springer, vol. 72(3), pages 745-787, September.

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    More about this item

    Keywords

    Mutual funds; Herding behavior; Career concerns;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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