Does Investment Horizon Matter? Disentangling the Effect of Institutional Herding on Stock Prices

Existing studies document that institutional herding has a stabilizing effect on stock prices, as stock returns are positively correlated with herding over one- to three-quarter horizons. The literature also shows that short-term institutions are better informed than long-term institutions. Motivated by heterogeneity in the level of informed trading between short-term and long-term institutions, this study disentangles the herding effect of short-term and long-term institutions on stock prices. Our results show that herding by short-term institutions promotes price discovery. In contrast, herding by long-term institutions drives stock prices away from fundamentals. Taken together, our findings suggest that the stabilizing effect documented in the existing literature is mainly driven by short-term institutions, and herding by long-term institutions has a destabilizing effect on stock prices.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

doctoral

Discipline thesis:degree_discipline

Graduate College

Grantor dc:publisher

The University of Arizona.

Year dc:date.issued

2012

Author dc:creator

• Yuksel, Hasan Zafer

Advisor dc:contributor.advisor

• Jiang, George J.

Committee members dc:contributor.committeemember

• Lamoureux, Christopher
• Litov, Lubomir
• Kelley, Eric
• Jiang, George J.

• Management
• institutional herding
• price impact

Statement dc:rights

• Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.

Language dc:language.iso

en

Handle dc:identifier.uri

http://hdl.handle.net/10150/232474

OAI identifier oai:identifier

oai:repository.arizona.edu:10150/232474