33 Pages Posted: 28 Jun 2000
Date Written: March 2000
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?
Keywords: Herd behavior, momentum strategies, financial markets
JEL Classification: G1, G2, F4
Suggested Citation: Suggested Citation
Bikhchandani, Sushil and Sharma, Sunil, Herd Behavior in Financial Markets: A Review (March 2000). IMF Working Paper No. 00/48. Available at SSRN: https://ssrn.com/abstract=228343 or http://dx.doi.org/10.2139/ssrn.228343