Herd Behavior in Financial Markets: A Review

Author/Editor:

Sunil Sharma ; Sushil Bikhchandani

Publication Date:

March 1, 2000

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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?

Series:

Working Paper No. 2000/048

Subject:

Asset and liability management Asset prices Asset valuation Financial institutions Financial markets Mutual funds Pension spending Prices Stock markets Stocks

English

Publication Date:

March 1, 2000

ISBN/ISSN:

9781451846737/1018-5941

Stock No:

WPIEA0482000

Pages:

32

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