Is anti-herding always a smart choice? Evidence from mutual funds

Lee, John Byong-Tek; Ma, Jun; Margaritis, Dimitris; Yang, Wanyi

doi:10.1016/j.irfa.2023.102824

Cited by 1 publication

(1 citation statement)

References 44 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Anti-herding managers, deviating from mainstream practices, may also exhibit significant performance differences [42]. Such behaviors can persistently affect future performance, with contrarian buys contributing positively while contrarian sells may negatively impact returns [43,44].…”

Section: Performance and Herdingmentioning

confidence: 99%

Does Herding and Anti-Herding Reflect Portfolio Managers’ Abilities in Emerging Markets?

Sheng,

Montgomery

2024

Mathematics

View full text Add to dashboard Cite

This study investigates the relationship between herding behaviors and the abilities of Chinese mutual fund managers. Adapting existing methodologies to suit the low information disclosure environment of the Chinese market, we measure herding behaviors and managers’ abilities. Our analysis goes beyond traditional approaches by examining the contribution of herding outcomes to picking and timing abilities linked with mutual fund flows. Moreover, we extend this investigation to incorporate manager replacements and different market conditions. Our findings reveal that moderate herding is associated with enhanced picking abilities, particularly in bull markets. However, this effect is partly counteracted by positive mutual fund flows, suggesting that managers adjust their strategies in response to fund inflows. Excessive herding in bull markets is linked to reduced timing abilities, although this negative impact is mitigated by high turnover. Conversely, managers with anti-herding skills exhibit lower picking abilities. We observe that managerial replacements are driven by poor performance rather than considerations of current abilities. Nonetheless, under a new manager, herding behavior reflects improved picking abilities, indicating a potential shift in managerial strategies. Overall, our study provides valuable insights into the relationship between herding behaviors and managerial competencies in the Chinese mutual fund industry, highlighting the nuances of decision making in different market contexts.

show abstract

Section: Performance and Herdingmentioning

confidence: 99%