Herd Behaviour and Cascading in Capital Markets: a Review and Synthesis
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- 14 March 2003
- journal article
- review article
- Published by Wiley in European Financial Management
- Vol. 9 (1) , 25-66
- https://doi.org/10.1111/1468-036x.00207
Abstract
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.Keywords
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