Author URLs
Document Type
Article
Publication Date
2016
Subject: LCSH
Institutional investors, Bull markets, Stock Market Bubble, 1995-2000,
JEL Classification
C34, G11, G14, G23
Disciplines
Economics
Abstract
This article investigates whether large non-bank institutional investors herded during the dot-com bubble of the 1990s. We use the vector Markov-switching model of Hamilton and Lin (1996) to analyse the technology stockholdings of 115 large institutional investors from 1980 to 2012. By imposing different restrictions on the elements of the transition probability matrix, we are able to test for various lead/lag scenarios that might have existed between the technology stockholding of each investor and that of the residual market. We find that only 17.4% of the investors in our sample herded during the dot-com bubble. Thus, during the dot-com bubble, herding among large institutional investors was not an especially widespread phenomenon. Among those investors that herded, 80% herded during the run-up, 10% during the collapse and 10% during both phases of the dot-com bubble. About 23% of all investors in our sample exited from the technology sector before the bubble collapsed. These results seem to support Abreu and Brunnermeier’s (2003) theory of bubbles and crashes.
DOI
10.1080/00036846.2016.1184376
Repository Citation
Balagyozyan, Aram and Cakan, Esin, "Did Large Institutional Investors Flock Into the Technology Herd? An Empirical Investigation Using a Vector Markov-switching Model" (2016). Economics & Business Analytics Faculty Publications. 9.
https://digitalcommons.newhaven.edu/economics-facpubs/9
Publisher Citation
Balagyozyan, A., & Cakan, E. (2016). Did large institutional investors flock into the technology herd? An empirical investigation using a vector Markov-switching model. Applied Economics, 1-17.
Comments
This is an Accepted Manuscript of an article published by Taylor & Francis in Applied Economics on June 17, 2016, available online: http://www.tandfonline.com/10.1080/00036846.2016.1184376 .