Herding in Equity Crowdfunding
67 Pages Posted: 8 Dec 2017 Last revised: 20 Jun 2019
Date Written: June 18, 2019
Do equity crowdfunding investors herd? We build a model where informed and uninformed investors arrive sequentially and choose whether and how much to invest. We test the model using data of investments on a leading European equity crowdfunding platform. We show theoretically and find empirically that the size and likelihood of a pledge is affected positively by the size of the most recent pledges, and negatively by the time elapsed since the most recent pledge. The empirical analysis is inconsistent with naive herding, independent investments, or exogenously correlated investments.
Keywords: Equity Crowdfunding, Herding
JEL Classification: D81, D83, G11, G14
Suggested Citation: Suggested Citation