Investors’ Herd Behavior: Rational or Irrational?

doi:10.1111/ajfs.12030

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Please use this identifier to cite or link to this item: https://tkuir.lib.tku.edu.tw/dspace/handle/987654321/92937

Title:	Investors’ Herd Behavior: Rational or Irrational?
Authors:	Lin, William T.;Tsai, Shih-Chuan;Lung, Pei-Yau
Contributors:	淡江大學財務金融學系
Keywords:	Trading noise;Herding;Institutional investors;Individual investors;Intraday transactions
Date:	2013-10-16
Issue Date:	2013-10-24 09:14:00 (UTC+8)
Publisher:	Chichester: Wiley-Blackwell Publishing Ltd.
Abstract:	This study examines the relationships between the herding of various investor groups and trading noise in the Taiwan stock market to determine whether any of the investor groups tend to herd rationally. The study uses a unique and comprehensive data set on intraday transactions and limit order books of the Taiwan Stock Exchange (TWSE). We calculate the high-frequency herding measures and trading noise in a call auction market. We find that institutional investors are likely to be informed traders and herd rationally based on superior information. Institutional investors' herding has a negative impact on trading noise. Their buy (sell) herding predicts positive (negative) future market returns. By contrast, the herding of individual investors tends to contain limited information, as it increases trading noise; the buy (sell) herding of individuals is negatively correlated with future market returns. These findings are more significant for stocks with higher turnover.
Relation:	Asia-Pacific Journal of Financial Studies 42(5), pp.755–776
DOI:	10.1111/ajfs.12030
Appears in Collections:	[Graduate Institute & Department of Banking and Finance] Journal Article

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