The Price Impact of Institutional Herding

@inproceedings{Verardo2008ThePI,
  title={The Price Impact of Institutional Herding},
  author={Michela Verardo},
  year={2008}
}
  • Michela Verardo
  • Published 2008
In this paper we develop a simple theoretical model to analyze the impact of institutional herding on asset prices. In our model, career-concerned money managers interact with pro…t-motivated proprietary traders and security dealers endowed with market power. The interaction between these three classes of traders generates rich implications. First, we show that the reputational concerns of fund managers imply an endogenous tendency to imitate past trades, which, in turn, impacts the prices of… CONTINUE READING
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