Do closed-end fund investors herd?

Regulatory mood-congruence and herding: Evidence from cannabis stocks

“…This has been attributed to the fact that low volatility periods render it easier for uninformed investors to track the trades of their informed peers, while also rendering the market's overall direction less ambivalent (thus facilitating herding on it). However, the presence of high volatility enhances uncertainty, thus rendering herding a viable tool in navigating through this uncertainty, as has been empirically confirmed in several studies (Blasco et al, 2012;Gavriilidis et al, 2013;Celiker et al, 2015;Cui et al, 2019). In view of the above, if the more (less) mood-congruent regulatory treatment of cannabis in Canada (the US) is expected to boost herding among cannabis stocks (in line with hypotheses 1a and 1c), it is impossible to predict whether this herding would appear more pronounced during high or low volatility periods.…”

“…This can raise liquidity risk, introduce frictions in the trading process, render order-execution more difficult and reduce the feasibility of any trading strategy, herding included. As a result, high volume levels are essential for herding to be viable, with empirical evidence (Gavriilidis et al, 2013;Economou et al, 2015b, Cui et al, 2019 confirming this. Additionally, high volume may also promote 39 Higher volatility may render the cannabis industry even riskier in the perception of fundamentals-driven investors, prompting them to exit the market in tandem with their peers.…”

“…Although a more (less) mood-congruent regulatory policy can lead a new industry to appear less (more) risky and, hence can promote or inhibit herding (as discussed previously), this may not be uniform across the universe of that industry's stocks, which are expected to vary in riskiness-terms. Herding, for example, has been found (Lakonishok et al, 1992;Wermers, 1999;Sias, 2004;Dang and Lin, 2016;Cui et al, 2019) to maintain an inverse relationship with size (appearing the strongest for smaller capitalization stocks) due to the high information risk of small stocks prompting investors to monitor their peers' actions when trading them. Additionally, sectors with greater uncertainty (in terms, e.g., of their cash flows) may be more prone to exhibiting herding, as evidence from Technology stocks has suggested in several studies (Brunnermeier and Nagel, 2004;Griffin et al, 2011;Singh, 2013;Gavriilidis et al, 2013;Andrikopoulos et al, 2017;Uwilingiye et al, 2019).…”

Management of Investment Funds Financial Fragility

“…Celiker, Chowdhury and Sonaer (2015) also found that mutual funds herd in industries. Cui, Gebka and Kallinterakis (2019) provided the investigation of herding among closed-end fund investors, drawing on the US closed-end fund market for the 1992-2016 period and results suggested closed-end fund investors herd significantly, with their herding being mainly driven by nonfundamentals. Deng, Hung and Qiao (2018) showed that mutual fund herding amplifies stock price crash risk.…”

Bank herding in loan markets: Evidence from geographical data in Japan

“…1 1 See, for example, Chiang and Zheng (2010), Park (2011), Lee, Chen, and Hsieh (2013), Yao, Ma, and He (2014), Humayun Kabir (2018), Cai, Han, Li, and Li (2019), and Cui, Gebka, and Kallinterakis (2019). …”