European Parliament Library

Herd Behavior in Financial Markets :, A Review, Sunil Sharma, Sushil Bikhchandani

Policymakers often express concern that herding by financial market participants destabilizes markets and increases the fragility of the financial system. This paper provides an overview of the recent theoretical and empirical research on herd behavior in financial markets. It addresses the following questions: What precisely do we mean by herding? What could be the causes of herd behavior? What success have existing studies had in identifying such behavior? And what effect does herding have on financial markets?
Table Of Contents
Intro -- Contents -- I. Introduction -- II. Causes of Rational Herd Behavior -- A. Information-based Herding and Cascades -- Application to Financial Markets -- B. Reputation-based Herding -- C. Compensation-based Herding -- III. Implications for Empirical Tests -- IV. The Empirical Evidence -- A. Herding in the Stock Market -- Drawbacks with the LSV Measure of Herding -- A Modification of the LSV Measure of Herding -- Other Measures of Herding -- B. Herding in Other Financial Markets -- C. Herding Among Investment Analysts and News Letters -- D. Herding in Emerging Stock Markets -- V. Concluding Remarks -- VI. References
Literary Form
non fiction
Bibliographic Level Mode of Issuance: Monograph
Physical Description
1 online resource (34 pages)
Specific Material Designation
Form Of Item

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