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Do the most skillful managers herd?

Published online by Cambridge University Press:  10 April 2017

MERCEDES ALDA
MERCEDES ALDA*
Affiliation:
University of Zaragoza, C/Gran Vía, 2, Zaragoza, Spain (e-mail: [email protected])
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Abstract

This paper analyzes whether herding and skillful managers may coexist. When herding appears, managers tend to present poor timing abilities; however, a weak herding level (a result commonly found in pension funds) may evidence a mixed scenario, where some managers develop skills, and others follow the herd. Additionally, when informational cascades emerge, some managers may act as leaders, anticipating others’ movements. Nonetheless, this anticipatory skill does not mean that leaders also anticipate market movements and present timing skills. Our results show herding and inter-temporal herding in a sample of Spanish pension funds, though the imitation behavior is not strong. We also find evidence of a mixed scenario, in which some non-herding managers present timing skills, while herding funds are not able to develop these abilities. Finally, we find successful timing for certain leaders, showing that the anticipation of others’ movements does not show real timing abilities.

Keywords

G02G23Abilitiesherdinginformational cascadesinter-temporal herdingtiming
Type
Article
Information
Journal of Pension Economics & Finance , Volume 17 , Issue 4 , October 2018 , pp. 488 - 512
Copyright
Copyright © Cambridge University Press 2017 

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