Herding in Smart-Beta Investment Products

Eduard Krkoska; Klaus Schenk-Hoppé

doi:10.3390/jrfm12010047

Herding in Smart-Beta Investment Products

Eduard Krkoska, Klaus Schenk-Hoppé

Economics

Research output: Contribution to journal › Article › peer-review

Abstract

We highlight herding of investors as one major risk factor that is typically ignored in statistical approaches to portfolio modelling and risk management. Our survey focuses on smart-beta investing where such methods and investor herding seem particularly relevant but its negative effects have not yet come to the fore. We point out promising and novel approaches of modelling herding risk which merit empirical analysis. This financial economists’ perspective supplements the vast statistical exploration of implementing factor strategies.

Original language	English
Article number	47
Number of pages	14
Journal	Journal of Risk and Financial Management
Volume	12
Issue number	1
DOIs	https://doi.org/10.3390/jrfm12010047
Publication status	Published - 21 Mar 2019

Keywords

herding
factor investing
risk

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10.3390/jrfm12010047

Cite this

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abstract = "We highlight herding of investors as one major risk factor that is typically ignored in statistical approaches to portfolio modelling and risk management. Our survey focuses on smart-beta investing where such methods and investor herding seem particularly relevant but its negative effects have not yet come to the fore. We point out promising and novel approaches of modelling herding risk which merit empirical analysis. This financial economists{\textquoteright} perspective supplements the vast statistical exploration of implementing factor strategies.",

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AB - We highlight herding of investors as one major risk factor that is typically ignored in statistical approaches to portfolio modelling and risk management. Our survey focuses on smart-beta investing where such methods and investor herding seem particularly relevant but its negative effects have not yet come to the fore. We point out promising and novel approaches of modelling herding risk which merit empirical analysis. This financial economists’ perspective supplements the vast statistical exploration of implementing factor strategies.

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KW - factor investing

KW - risk

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Herding in Smart-Beta Investment Products

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