Opinion Divergence Among Professional Investment Managers

Hu, Gang; Meng, J. Ginger; Potter, Mark

doi:10.1111/j.1468-5957.2008.02083.x

Cited by 13 publications

(9 citation statements)

References 59 publications

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“…Sias (2004), Choi and Sias (2009), Andreu et al (2009), and Gavriilidis, Kallinterakis, and Ferreira (2013) provide alternative approaches which focus on intertemporal aspects in fund managers' trading behavior. One way to account for different transaction sizes, would be to focus only on transactions of sufficient size (see Andreu et al, 2009, who also provide other means to also account for transaction size, as well as Hu, Meng, and Potter, 2008, in a slightly different context). However, we show that the traditional herding measure's bias varies with the number of transactions used in the analysis, and different filtering rules would thus distort the measure differently.…”

Section: Introductionmentioning

confidence: 99%

Measuring mutual fund herding – A structural approach

Frey

Herbst

Walter

2014

Journal of International Financial Markets, Institutions and Mo

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This paper proposes a methodological improvement to empirical studies of herd behavior based on investor transactions. By developing a simple model of trading behavior, we show that the traditionally used herding measure produces biased results. As this bias depends on characteristics of the data, it also affects the robustness of previous findings. We derive a new measure that is unbiased and shows superior statistical properties for data sets commonly used. In an analysis of the German mutual fund market, our measure provides new insights into fund manager herding that would have been undetected under the traditional statistic.

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Section: Introductionmentioning

confidence: 99%

Measuring mutual fund herding – A structural approach

Frey

Herbst

Walter

2014

Journal of International Financial Markets, Institutions and Mo

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“…Their findings also suggest that over-optimism, and not additional risk factors, is the dominant force driving returns. Hu et al (2007) also find that disagreement among buy-side managers precedes low returns, especially for stocks that have constraints on short-selling. In summary, these studies employing different measures of investor disagreement find evidence corroborating Miller's (1977) sidelined investor hypothesis.…”

Section: Introductionmentioning

confidence: 79%

New evidence on the effect of belief heterogeneity on stock returns

Hobbs

Lee

Singh

2016

Rev Quant Finan Acc

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We develop a new measure to examine the effect of the heterogeneity of beliefs among investors on stock returns. Our initial results do not support the information asymmetry hypothesis or the sidelined investor hypothesis (and thus are consistent with the unbiased prices hypothesis). However, since the first two hypotheses make opposite predictions regarding stock returns, they may both have merit but offset one another. Further analysis suggests that this is indeed the case. Overall, our results support both the information asymmetry and sidelined investor hypotheses and thus occupy middle ground in the debate on the effect of disagreement on stock returns.

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“…() and Hu et al. () document results that support Miller's theory. In contrast, results reported by Diamond and Verrecchia (), Johnson (), and Bali and Cakici () suggest that returns patterns documented in many studies might be explained by some phenomenon other than short‐sale constraints.…”

Section: Introductionmentioning

confidence: 88%

Earnings Announcements, Differences of Opinion and Management Guidance

Keskek¹,

Rees

Thomas³

2013

Business Fin & Account

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Berkman, Dimitrov, Jain, Koch, and Tice (2009) document a negative relationship between differences of opinion and earnings announcement returns, and this relationship is more pronounced when short‐sale constraints are likely to be high. These findings are interpreted as support for the theory in Miller (1977) that binding short sale constraints cause pessimists to be underrepresented in price formation. We conjecture that accounting information (i.e., earnings news) is likely to play a role in this returns pattern. After controlling for the level of earnings news, we find that the relationship between differences of opinion and stock returns is either eliminated or opposite from what is predicted by Miller's theory. Further, we present evidence that suggests the confounding effect of earnings news can be explained by (pessimistic) management earnings guidance. Our findings offer an alternative explanation for why low differences of opinion stocks earn greater abnormal returns around earnings announcements.

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Opinion Divergence Among Professional Investment Managers

Cited by 13 publications

References 59 publications

Measuring mutual fund herding – A structural approach

Measuring mutual fund herding – A structural approach

New evidence on the effect of belief heterogeneity on stock returns

Earnings Announcements, Differences of Opinion and Management Guidance

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