Herding Behavior of Institutional Investors in Romania. An Empirical Analysis

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Abstract

During the last decades, institutional investors have been the main players, both in developed as well as in emerging stock markets. Thus, their investment behavior was analyzed at the national or international level, in order to assess if institutional investors herd, increase stock return volatility, affect market efficiency and liquidity, influence the corporate governance, or destabilize stock prices. This paper studies the behavior of the institutional investors on the Romanian stock market, a European frontier market that struggles to attain the status of emerging market. We examine if the disclosure level generates any herding behavior for institutional investors. In emerging markets, the lack of transparency affects the degree of investments in a listed company, as long as insider trading is pushed to the limit of the legal line. For this study, we used financial information from the companies listed on the Bucharest Stock Exchange for the period 2010-2014. The findings highlight that there is a certain herding behavior among institutional investors in Romania.

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