Premium
Herd Behaviour and Cascading in Capital Markets: a Review and Synthesis
Author(s) -
Hirshleifer David,
Hong Teoh Siew
Publication year - 2003
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/1468-036x.00207
Subject(s) - herding , incentive , herd behavior , microeconomics , economics , information cascade , financial economics , stochastic game , herd , business , industrial organization , psychology , social psychology , geography , medicine , veterinary medicine , forestry
We review theory and evidence relating to herd behaviour, payoff and reputational interactions, social learning, and informational cascades in capital markets. We offer a simple taxonomy of effects, and evaluate how alternative theories may help explain evidence on the behaviour of investors, firms, and analysts. We consider both incentives for parties to engage in herding or cascading, and the incentives for parties to protect against or take advantage of herding or cascading by others.