Portfolio Performance in Relation to Herding Behavior in the Taiwan Stock Market

Herding behavior, which is investing in crowded stocks during a specific period, will push the target stocks' return down or up. Using both institutional and individual investors' intraday trading data to calculate the measure of daily herding, we find that a zero-cost investing strategy o...

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Bibliographic Details
Published inEmerging markets finance & trade Vol. 48; no. sup2; pp. 82 - 104
Main Authors Chang, Chiao-Yi, Chen, Hsiang-Lan, Jiang, Zong-Ru
Format Journal Article
LanguageEnglish
Published Abingdon Routledge 01.07.2012
M. E. Sharpe, Inc
Taylor & Francis Ltd
Subjects
Behavior
Common stock
Financial portfolios
Herding
individual investor
Institutional investments
institutional investor
Investment policy
Investment strategies
Investors
Portfolio performance
Price momentum
Securities markets
Securities trading
Stock markets
Stock prices
Stock purchases
Stock sales
Studies
Taiwan
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Summary:Herding behavior, which is investing in crowded stocks during a specific period, will push the target stocks' return down or up. Using both institutional and individual investors' intraday trading data to calculate the measure of daily herding, we find that a zero-cost investing strategy of buying long and high and selling short and high is profitable. The profits gained strategically through herding by individual investors are greater than those earned by institutional investors. This means institutional investors reflect the information quickly and, although they do behave as a herd, it is harder to exploit the herding of institutional investors to make strategically gained profits.
ISSN:1540-496X
1558-0938
DOI:10.2753/REE1540-496X48S205