LAUSR

The article examines whether mutual fund managers’ career concerns contribute to their herding behavior. We find that mutual funds herd, on average, 71% more in down markets than in up markets. Furthermore, we find that poorly performing funds herd, on average, 17% more than well performing funds, and that this pattern is the result of poorly performing funds that herd, on average, 110% more in down markets relative to up markets. Our evidence is consistent with the argument that poorly performing managers have stronger career concerns, and particularly so in down markets.