Markets, Herding and Response to External Information

Markets, Herding and Response to External Information

We focus on the influence of external sources of information upon financial markets. In particular, we develop a stochastic agent-based market model characterized by a certain herding behavior as well as allowing traders to be influenced by an external dynamic signal of information. This signal can be interpreted as a time-varying advertising, public perception or rumor, in favor or against one...

Herding, Information Cascades and Volatility Spillovers in Futures Markets

Institutional herding in international markets

This paper studies herding behavior of institutional investors in international markets. First, we document the existence of wide-spread herding in 41 countries (referred to as ‘‘target countries’’ hereafter) in the sample. We then examine the relation between contemporaneous institutional demand and future returns and find that institutional herding stabilizes prices. Next, we examine the rela...

Rational Herding in Microloan Markets

Microloan markets allow individual borrowers to raise funding from multiple individual lenders. We use a unique panel dataset which tracks the funding dynamics of borrower listings on Prosper.com, the largest microloan market in the United States. We find evidence of rational herding among lenders. Well-funded borrower listings tend to attract more funding after we control for unobserved listin...

Herding and Speculation in Experimental Asset Markets

I conduct an experiment to observe individual traders’ beliefs and desired behavior in a partial-equilibrium asset market. Isolated traders trade a risky asset in a market with exogenous prices. The price series exhibits a "bubble," diverging strongly from the expected dividend yield. Before trading, traders predict the asset’s price in the upcoming period, the price in the …nal period, and the...