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Herd Behavior in Financial Markets An Experiment with Financial Market Professionals

We study herd behavior in a laboratory financial market with financial market professionals. We compare two treatments, one in which the price adjusts to the order flow so that herding should never occur, and one in which event uncertainty makes herding possible. In the first treatment, subjects her...

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Bibliographic Details
Main Author: Cipriani, Marco
Other Authors: Guarino, Antonio
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2008
Series:IMF Working Papers
Subjects:
Balance Of Trade
Finance
Asset Valuation
Economics Of Gender
Non-labor Discrimination
Capital Market
Trade Balance
Exports And Imports
General Financial Markets: General (includes Measurement And Data)
International Economics
Gender Studies, Gender Groups
Education
International Financial Markets
Education: General
Asset-liability Management
Gender Studies
Sex Role
Empirical Studies Of Trade
Financial Risk Management
Finance: General
Securities Markets
Gender
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:We study herd behavior in a laboratory financial market with financial market professionals. We compare two treatments, one in which the price adjusts to the order flow so that herding should never occur, and one in which event uncertainty makes herding possible. In the first treatment, subjects herd seldom, in accordance with both the theory and previous experimental evidence on student subjects. A proportion of subjects, however, engage in contrarianism, something not accounted for by the theory. In the second treatment, the proportion of herding decisions increases, but not as much as theory suggests; moreover, contrarianism disappears altogether
Physical Description:28 pages
ISBN:9781451869996

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