Firm Specific And Macro Herding By Professional And Amateur Investors And Their Effects On Market Volatility
The authors find a herding tendency among both amateur and professional investors and conclude that the propensity to herd is lower in the professionals. These results are obtained both when they consider herding into individual stocks and herding into stocks in general. Herding depends on the firm's systematic risk and size, and the professionals are less sensitive to these variables. The differences between the amateurs and the professionals may be attributable to the latter's superior financial training. Most of the results are consistent with the theory that herding is information-based.