Herding in French stock markets: Empirical evidence from equity mutual funds

Mohamed El Hedi Arouri (1) , Raphaëlle Bellando (2) , Sébastien Ringuedé (2) , Anne-Gaël Vaubourg (3)

1 CRGM - Centre de Recherche Clermontois en Gestion et Management
2 LEO - Laboratoire d'Économie d'Orleans [UMR7322]
3 Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales

Using the traditional herding measure of Lakonishok, Shleifer and Vishny (1992) (LSV) and the more recent measure of Frey, Herbst and Walter (2007) (FHW), we assess herding by French equity mutual funds between 1999 and 2005. We show that LSV herding amounts to 6.5%, while FHW herding is approximately 2.5 times stronger. We find that herding is stronger in small capitalisation firms than in medium- and large capitalisation firms. Herding is also more severe among foreign stocks than among EU-15 or French stocks. Moreover, French mutual funds are shown to partially use positive feedback strategies. Finally, we establish that sell-herding has a destabilising impact on stock prices and that this impact is larger for foreign stocks.

Mots clés: Herding; French; equity; mutual funds

Domaines: Economies et finances

Mohamed El Hedi Arouri, Raphaëlle Bellando, Sébastien Ringuedé, Anne-Gaël Vaubourg. Herding in French stock markets: Empirical evidence from equity mutual funds. Bankers Markets & Investors : an academic & professional review, 2013, 127, pp.42-58. ⟨halshs-01066726⟩