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2013/3 (Vol. 34)

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Previous Pages 67 - 104



We introduce a new measure of herding that allows for tracking dynamics of individual herding. Using a database of nearly 8 million trades by 87,373 retail investors between 1999 and 2006, we show that individual herding is persistent over time and that past performance and the level of sophistication influence this behavior. We are also able to answer a question that was previously unaddressed in the literature: is herding profitable for investors? Our unique dataset reveals that the investors trading against the crowd tend to exhibit more extreme returns and poorer risk-adjusted performance than the herders.


  1. Introduction
  2. The framework
    1. Measuring herding at the asset level: the LSV measure and extensions
    2. Measuring herding at the investor level: the Investor Herding Measure
  3. Data and descriptive statistics
  4. Herding behavior at the stock level
    1. Herding and stock characteristics
    2. Persistence
  5. Herding behavior at the individual level
    1. First results
    2. Persistence
    3. Herding and investor characteristics
    4. Relationship between past performance and herding
    5. Payoff implications
  6. Conclusion

To cite this article

Maxime Merli, Tristan Roger, “ What drives the herding behavior of individual investors? ”, Finance 3/2013 (Vol. 34) , p. 67-104
URL : www.cairn.info/revue-finance-2013-3-page-67.htm.

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