August 27, 2003

Behavioral Finance: Herding

John Griffin, Jeffrey Harris, and Selim Topaloglu (2003), "The Dynamics of Institutional and Individual Trading," Journal of Finance (December).

Abstract: We study the daily and intra-daily cross-sectional relation between stock returns and the trading of institutional and individual investors in NASDAQ 100 securities. Based on the previous day's stock return, the top-performing deciles... is 23.9% more likely to be bought in net by institutions... than... the bottom performance decile. Strong contemporaneous daily patterns can largely be explained by net institutional (individual) trading positively (negatively) following past intra-day excess stock returns (or the news associated therein). In comparison, evidence of return predictability and price pressure are economically small.

Is this positive-feedback trading by institutions, or formal and informal limit buy and sell orders by individuals?

Posted by DeLong at August 27, 2003 12:43 PM | TrackBack


full article:

as I read it, the answer to your question is, both. it makes a good deal of intuitive sense to me given the relative transactions costs faced by the two groups.

you didn't post this just because they reference you, I'm sure.


Posted by: wcw on August 28, 2003 02:16 PM
Post a comment