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

Hirshleifer, David; Teoh, Siew Hong

doi:10.2139/ssrn.296081

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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 Hirshleifer

David Hirshleifer

University of Southern California - Marshall School of Business - Finance and Business Economics Department; National Bureau of Economic Research (NBER)

Siew Hong Teoh

UCLA Anderson School of Management

There are 2 versions of this paper

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 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