Institutional trading and attention bias

Hung, Weifeng

doi:10.1016/j.intfin.2013.12.001

Cited by 9 publications

(8 citation statements)

References 51 publications

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“…It is, therefore, unlikely that Dutch pension funds' trading has contributed to the turmoil in countries, such as Greece, Spain, Italy, Cyprus, and Ireland. The absence of return reversals following pension fund trading is consistent with our hypothesis that pension fund's trading reflects the way information is impounded into security prices (DeLong et al, 1990;Choe et al, 1999;Wermers, 1999;Sias, 2004;Hung, 2014). However, there are some indications of destabilization for quintiles 2, 5, 2 and 1.…”

Section: Stabilizing or Destabilizingsupporting

confidence: 85%

“…In this paragraph, we investigate whether herd behavior may have a stabilizing or destabilizing effect on financial markets conducting a return reversal analysis. The absence of price reversals following pension fund trading is consistent with the incorporation of information into security prices (DeLong et al, 1990;Choe et al, 1999;Wermers, 1999;Sias, 2004;Hung, 2014). Thus, when we find that returns continue in the same direction, this means that prices correctly reflect the fundamental value.…”

Section: Stabilizing or Destabilizingsupporting

confidence: 83%

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Herding Behavior of Dutch Pension Funds in Asset Class Investments

Koetsier

Bikker

2018

SSRN Journal

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This study investigates asset herd behavior for Dutch pension funds from 1999 to 2014 using quarterly data. We find considerable asset class herd behavior, which is more intensive for the more 'exotic' sub-asset classes, such as private equity and emerging market shares. We find higher buy herd behavior in sub-asset class markets, which are affected by the stock market and debt crises. The extent of pension fund's herd behavior is affected by financial market, macroeconomics circumstances and returns. We find destabilizing effects of herd behavior for shares and private equity on the sell side, for fixed-interest investments on the buy side and for real estate on both the buy and sell side. We find stabilizing effects of herd behavior for shares and private equity on the buy side, for fixed interest investments on the sell side and for other investments on both the buy and the sell side. For crises, we find evidence that destabilizing behavior is concentrated on the buy side, whereas sell herd behavior mostly has a stabilizing effect.

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Section: Stabilizing or Destabilizingsupporting

confidence: 85%

Section: Stabilizing or Destabilizingsupporting

confidence: 83%

Herding Behavior of Dutch Pension Funds in Asset Class Investments

Koetsier

Bikker

2018

SSRN Journal

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“…Institutional investors are classified into three main groups: DIs (including insurance companies, mutual funds, commercial banks, and other investment companies), qualified FI investors (including offshore and onshore FI investors), and SDs. We examine each kind of institutional trading around price manipulation events by replicating all methodologies applied by Hung (2014) and Thu Luu and Duong Dang (2023). Specifically, we examine NTV :

{{NTV}}_{i,\unicode{x02007}k,\unicode{x02007}t}\frac{{{Buy}{Volume}}_{i,\unicode{x02007}k,\unicode{x02007}t}-{{Sell}{Volume}}_{i,\unicode{x02007}k,\unicode{x02007}t}}{{{Outstanding}{shares}}_{i,\unicode{x02007}t}}{,}

where, Buy volume i, k, t (Sell volume i, k, t ) is the cumulative amount for institution k of stock i on Day t .…”

Section: Data and Methodologiesmentioning

confidence: 99%

Are institutional investors colluding with manipulators?

Luu

2023

Financ Manag Account

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This paper examines the trading behavior of institutional investors in Taiwan before, during, and after a manipulation event and determines whether institutional investors benefit from their trading behavior during the period from the year 2000 to 2020. We find that stocks with a low turnover and small market capitalization are the main targets of price manipulators. In addition, the stock price of manipulated firms increases from the start date of the manipulation event, peaks at the end of the event, then falls after the event. Foreign institutions collude with manipulators to exaggerate stock prices for self‐benefit. In contrast, securities dealers counter the trading behavior of manipulators and act as market stabilizers, causing them to suffer losses. Moreover, foreign institutions earn higher returns on stocks of manipulated firms with a low turnover during and soon after manipulation; however, they earn a higher return on stocks of manipulated firms with a high turnover in the long run after manipulation.

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“…Herd behaviour can arise from the simultaneous release of new information that pension funds may interpret in the same way, so that they undertake the same buy and sell actions. If herding does indeed arise because of the release of new information, then, on average, no return reversals will take place in the following quarters (Hung et al, 2014). However, if pension funds follow each other without any underlying justification, this behaviour can lead to price imbalances and abnormal volatility (Note 15).…”

Section: Stabilising or Destabilising Behaviourmentioning

confidence: 99%

Herd Behaviour of Pension Funds by Asset Class

Koetsier¹,

Bikker²

2023

IJEF

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This study investigates asset herd behaviour for Dutch pension funds from 1999 to 2014 using quarterly data. We find herd behaviour for investments in 20 asset classes including non-traditional asset classes, and to both purchasing and selling. Pension funds’ herd behaviour is particularly high in alternative investments, which might increase herding in general as pension funds move their portfolio towards these assets in recent years. Herding intensity is higher during stock market crises, such as the Dot.com and the financial crisis, than during non-crisis conditions. However, during real estate or bond market crises, herding behaviour intensity remains virtually unchanged compared to non-crisis periods. The extent to which this behaviour has a stabilising or destabilising impact on financial markets varies per asset class. It is striking that sales of assets by pension funds on the equity and bond markets in times of crisis often have a stabilising impact, whereas this is not the case on the buying side.

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Institutional trading and attention bias

Cited by 9 publications

References 51 publications

Herding Behavior of Dutch Pension Funds in Asset Class Investments

Herding Behavior of Dutch Pension Funds in Asset Class Investments

Are institutional investors colluding with manipulators?

Herd Behaviour of Pension Funds by Asset Class

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