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Mutual Fund Herding and Its Impact on Stock Returns: Evidence from the Taiwan Stock Market

In: Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives In 4 Volumes

Author

Listed:
  • Weifeng Hung
  • Chia-Chi Lu
  • Cheng Few Lee

Abstract

Using quarterly ownership data which identify identity codes of mutual funds in Taiwan, we investigate mutual fund herding and its impact on stock price. We show that mutual funds tend to follow their own steps in trading rather than follow trades made by other funds. More importantly, evidence of price continuation following mutual fund herd buying suggests that such herding is based on value-relevant information and is consistent with the investigative herding hypothesis. Alternatively, evidence of return reversal following mutual fund herd selling suggests that such herding is non-informational and is consistent with the characteristic herding hypothesis.

Suggested Citation

  • Weifeng Hung & Chia-Chi Lu & Cheng Few Lee, 2024. "Mutual Fund Herding and Its Impact on Stock Returns: Evidence from the Taiwan Stock Market," World Scientific Book Chapters, in: Cheng Few Lee & Alice C Lee & John C Lee (ed.), Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives In 4 Volumes, chapter 23, pages 795-820, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811269943_0023
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    More about this item

    Keywords

    Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G1 - Financial Economics - - General Financial Markets
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • G3 - Financial Economics - - Corporate Finance and Governance

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