IMF Working Papers

Herd Behavior in Financial Markets: A Review

By Sunil Sharma, Sushil Bikhchandani

March 1, 2000

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Sunil Sharma, and Sushil Bikhchandani. Herd Behavior in Financial Markets: A Review, (USA: International Monetary Fund, 2000) accessed November 21, 2024
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?

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

Keywords: Adverse selection, Agent investor, Asset prices, Asset valuation, Benchmark investor, Company stock, Financial markets, Herd behavior, Investors H, Large cap, Momentum strategies, Mutual fund, Mutual funds, Non-resident investor, Profit-maximizing investor, Research effort, Risk-averse investor, Stock markets, Stocks, Type D investor, Type f investor, WP

Publication Details

  • Pages:

    32

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2000/048

  • Stock No:

    WPIEA0482000

  • ISBN:

    9781451846737

  • ISSN:

    1018-5941

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