Herd Behavior and Cascading in Capital Markets: A Review and Synthesis

David Hirshleifer and Siew Hong Teoh

MPRA Paper from University Library of Munich, Germany

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 behavior 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: herd behavior; informational cascades; social learning; analyst herding; capital markets; financial reporting; behavioral finance; investor psychology; market efficiency (search for similar items in EconPapers)
JEL-codes: D82 D83 D84 D85 G1 G11 G14 G21 G3 M14 (search for similar items in EconPapers)
Date: 2001-12-19
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

Published in European Financial Management 1.9(2003): pp. 25-66

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Related works:
Journal Article: Herd Behaviour and Cascading in Capital Markets: a Review and Synthesis (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:5186

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