مقاله سال ۲۰۱۷

Herding alludes to investors imitating other investors’ actions whilst ignoring their own information set when it differs from what everyone else is doing (Banerjee, 1992; Bikhchandani et al., 1992). This type of investor behavior stands at crossroads with Samuelson and Fama’s Efficient Market Hypothesis (EMH)1 , which not only initiated tremendous debate, modeling and commentary but also remained a prominent financial theory from the 1960s till the turn of century, when financial economists and statisticians began to realize that psychology, human biases and preferences had a role to play in how prices and markets behaved.

Behavioral finance emerged as a potent critique of the EMH. Rationality, as a prime characteristic of utility-maximizing investors, began to be revisited. The academic attention, which was focused on randomness and unpredictability of stock prices, magnified to include the possibility that stock prices may be partially predictable. Cognitive psychology, with its biases and irrationality, began to be considered as one of the reasons that explain human decision making, especially under stress and uncertainty. Herding was one of them.

Whether herding occurs due to rational motivations (Calvo and Mendoza, 2000); reputational and conformist preferences, (Scharfstein and Stein, 1990; Bikhchandani and Sharma, 2001), peer pressure and positive-feedback strategy (Lakonishok et al., 1992), or cognitive biases (Lux, 1995; Devenow and Welch, 1996), it has garnered significant academic recognition and reflection. Herding could also be intentional (Devenow and Welch 1996, Clement and Tse 2005) or spurious (Bikhchandani and Sharma 2001, Wermers 1999).