Topic
Herd behavior
About: Herd behavior is a research topic. Over the lifetime, 685 publications have been published within this topic receiving 25051 citations. The topic is also known as: herding & swarm behaviour in quadrupeds.
Papers published on a yearly basis
Papers
Posted Content•
TL;DR: In this paper, the authors examine some of the forces that can lead to herd behavior in investment and discuss applications of the model to corporate investment, the stock market, and decision making within firms.
Abstract: This paper examines some of the forces that can lead to herd behavior in investment. Under certain circumstances, managers simply mimic the investment decisions of other managers, ignoring substantive private information. Although this behavior is inefficient from a social standpoint, it can be rational from the perspective of managers who are concerned about their reputations in the labor market. We discuss applications of the model to corporate investment, the stock market, and decision making within firms. (JEL 026, 522) A basic tenet of classical economic theory is that investment decisions reflect agents' rationally formed expectations; decisions are made using all available information in an efficient manner. A contrasting view is that investment is also driven by group psychology, which weakens the link between information and market outcomes. In The General Theory, John Maynard Keynes (1936, pp. 157-58) expresses skepticism about the ability and inclination of "long-term investors" to buck market trends and ensure efficient investment. In his view, investors may be reluctant to act according to their own information and beliefs, fearing that their contrarian behavior will damage their reputations as sensible decision makers:
3,095 citations
TL;DR: This paper analyzed the trading activity of the mutual fund industry from 1975 through 1994 to determine whether funds "herd" when they trade stocks and investigate the impact of herding on stock prices.
Abstract: We analyze the trading activity of the mutual fund industry from 1975 through 1994 to determine whether funds “herd” when they trade stocks and to investigate the impact of herding on stock prices. Although we find little herding by mutual funds in the average stock, we find much higher levels in trades of small stocks and in trading by growth-oriented funds. Stocks that herds buy outperform stocks that they sell by 4 percent during the following six months; this return difference is much more pronounced among small stocks. Our results are consistent with mutual fund herding speeding the price-adjustment process. DO INSTITUTIONAL INVESTORS “F LOCK TOGETHER” ~or “herd,” as it is often called! when they trade securities? Do some investors follow the lead of others when they trade? Such questions have interested researchers for some time, and are central to understanding the impact of institutional trading on securities markets and to understanding the way in which information becomes incorporated into market prices. 1
1,581 citations
1 Jul 2000
TL;DR: An overview of the recent theoretical and empirical research on herd behavior in financial markets can be found in this article, where the authors look at what precisely is meant by herding, the causes of herd behavior, the success of existing studies in identifying the phenomenon, and the effect that herding has on financial markets.
Abstract: This paper provides an overview of the recent theoretical and empirical research on herd behavior in financial markets. It looks at what precisely is meant by herding, the causes of herd behavior, the success of existing studies in identifying the phenomenon, and the effect that herding has on financial markets. Copyright 2001, International Monetary Fund
1,215 citations
TL;DR: In this paper, the authors formalize herd behavior or mutual mimetic contagion in speculative markets and explain the emergence of bubbles as a self-organizing process of infection among traders leading to equilibrium prices which deviate from fundamental values.
Abstract: This paper attempts to formalize herd behavior or mutual mimetic contagion in speculative markets. The emergence of bubbles is explained as a self-organizing process of infection among traders leading to equilibrium prices which deviate from fundamental values. It is postulated furthermore that the speculators' readiness to follow the crowd depends on one basic economic variable, namely actual returns. Above average returns are reflected in a generally more optimistic attitude that fosters the disposition to overtake others' bullish beliefs and vice versa. This economic influence makes bubbles transient phenomena and leads to repeated fluctuations around fundamental values. Copyright 1995 by Royal Economic Society.
1,211 citations
TL;DR: This article found that inexperienced analysts are more likely to be terminated for inaccurate earnings forecasts than are their more experienced counterparts, and they are also less likely to issue timely forecasts and revise their forecasts more frequently.
Abstract: Several theories of reputation and herd behavior (e.g., Scharfstein and Stein (1990) and Zweibel (1995)) suggest that herding among agents should vary with career concerns. Our goal is to document whether such a link exists in the labor market for security analysts. We find that inexperienced analysts are more likely to be terminated for inaccurate earnings forecasts than are their more experienced counterparts. Controlling for forecast accuracy, they are also more likely to be terminated for bold forecasts that deviate from the consensus. Consistent with these implicit incentives, we find that inexperienced analysts deviate less from consensus forecasts. Additionally, inexperienced analysts are less likely to issue timely forecasts, and they revise their forecasts more frequently. These findings are broadly consistent with existing career concern motivated herding theories.
1,153 citations
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Performance Metrics
| Year | Papers |
|---|---|
| 2025 | 57 |
| 2024 | 91 |
| 2023 | 121 |
| 2022 | 119 |
| 2021 | 45 |
| 2020 | 48 |