Herd Behavior in Financial Markets: A Review

Posted: 11 Jul 2005

See all articles by Sushil Bikhchandani

Sushil Bikhchandani

University of California, Los Angeles - Anderson School of Management

Sunil Sharma

George Washington University - Elliott School of International Affairs

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Abstract

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

Bikhchandani, Sushil and Sharma, Sunil, Herd Behavior in Financial Markets: A Review. IMF Staff Papers IMF Staff Papers, Vol. 47, No. 3, pp. 279-310, 2000. Available at SSRN: https://ssrn.com/abstract=754264

Sushil Bikhchandani

University of California, Los Angeles - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095
United States
310-206-2686 (Phone)
310-825-1581 (Fax)

Sunil Sharma (Contact Author)

George Washington University - Elliott School of International Affairs ( email )

Institute for International Economic Policy
1957 E Street NW
Washington, DC 20052
United States

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