Herd Behaviour in Financial Markets: Do Traders Follow the Crowd or Do Their Own Thing?

• Main Author: Knowledge@SMU
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2008
• Subjects: Accounting; Business; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/ksmu/56; https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1055&context=ksmu
• Institution: Singapore Management University

In financial markets, what part of a trader’s action is simply “following the crowd” or herding, and how much is based on the trader’s own information? Herding has been shown to decrease the stability and efficiency of markets, hence the interest in these behaviours. Marco Cipriani (Asian Division, IMF Institute) and Antonio Guarino (University College London) studied herd behaviour in a laboratory setting involving financial market professionals. Cipriani presented a co-authored IMF working paper on herd behaviour in financial markets at a recent seminar at the Singapore Management University. --------------------------------------------------------------------------------