Short-term Herding of Institutional Traders: New Evidence from the German Stock Market


  • Support by the Deutsche Forschungsgemeinschaft (DFG) through the CRC 649 “Economic Risk” is greatfully acknowledged. We thank the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht - BaFin) for providing the data and, in particular, Michael Kollak for his support. Thanks to an anonymous referee for helpful comments and suggestions. An earlier version of the paper circulated under the title ‘Herding of institutional traders: new evidence from daily data’.


This paper employs a new and comprehensive data set to investigate short-term herding behaviour of institutional investors. Using data of all transactions made by financial institutions in the German stock market, we show that herding behaviour occurs on a daily basis. However, in contrast to longer-term herding measures obtained from quarterly data, results based on daily data do not indicate that short-term herding tends to be more pronounced in small capitalised stocks or in times of market stress. Moreover, we find that herding measures based on anonymous transactions can lead to misleading results about the behaviour of institutional investors during the recent financial crisis.