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

Hirshleifer, David A.; Teoh, Siew Hong

doi:10.2139/ssrn.296081

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

Dice Center Working Paper No. 2001-20

58 Pages Posted: 10 Jan 2002

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business; NBER

Siew Hong Teoh

University of California - Irvine - Accounting Area

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: 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