Herding Behavior in Student Managed Investment Funds

Document Type

Article

Publication Date

2012

Publication Title

Journal of Economics and Economic Education Research

First Page

97

Last Page

110

Additional Publication URL

http://www.alliedacademies.org/public/journals/JournalDetails.aspx?jid=4

Abstract

Student Managed Investment Funds (SMIFs) have grown in number; unfortunately, there has been little research on the efficacy of these funds. We fill this gap by exploring the potential consequences of student investment management. We find that investment decisions are often impacted by herding behavior, which results in underperformance. We further examine characteristics that influence the likelihood of herding, finding that pre-existing knowledge of the company under consideration, as well as amplified time constraints, increase the probability that herding occurs. In contrast, we find that increased education, both general and targeted behavioral education, reduces the likelihood (and impact) of herding.

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