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

Dice Center Working Paper No. 2001-20

58 Pages Posted: 10 Jan 2002

See all articles by David A. Hirshleifer

David A. Hirshleifer

Marshall School of Business, USC; National Bureau of Economic Research (NBER)

Siew Hong Teoh

UCLA Anderson School of Management

Date Written: December 19, 2001

Abstract

We review theory and evidence relating to herd behavior, 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.

JEL Classification: G11, G12, G14, G15, G31, M41

Suggested Citation

Hirshleifer, David A. and Teoh, Siew Hong, Herd Behavior and Cascading in Capital Markets: A Review and Synthesis (December 19, 2001). Dice Center Working Paper No. 2001-20, Available at SSRN: https://ssrn.com/abstract=296081 or http://dx.doi.org/10.2139/ssrn.296081

David A. Hirshleifer (Contact Author)

Marshall School of Business, USC ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

HOME PAGE: http://https://sites.uci.edu/dhirshle/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Siew Hong Teoh

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://www.anderson.ucla.edu/faculty-and-research/accounting/faculty/teoh

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