Herd Behavior in Financial Markets : An Experiment with Financial Market Professionals / Marco Cipriani, Antonio Guarino.

Format:

Book

Government document

Author/Creator:

Cipriani, Marco.

Contributor:

Guarino, Antonio.

Series:

IMF Working Papers; Working Paper ; No. 2008/141

IMF working paper ; WP/08/141

IMF Working Papers

Language:

English

Subjects (All):

Capitalists and financiers--Psychology--Econometric models.

Capitalists and financiers.

Investments--Decision making--Econometric models.

Investments.

Collective behavior--Econometric models.

Collective behavior.

Physical Description:

1 online resource (30 p.)

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2008.

Language Note:

English

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.

Contents:

Contents; I. Introduction; A. Literature Review; II. The Theoreticalmodel; A. The model structure; B. Theoretical predictions; Figures; 1. Prices and Traders' Expectations after a History of Buys; III. The Experiment and the Experimental Design; A. The experiment; B. Experimental design: the two treatments; 2. Prices and Traders' Expectations after a History of Sells; 3. Prices and Traders' Expectations after a Sell Followed by a History of Buys; IV. Results: Rationality, Herding and Contrarian Behavior; A. Treatment I; Tables; 1. Average behavior in Treatment I

2. Cascade trading behavior in Treatment IB. Treatment II; 3. No trade in Treatment I; 4. Average behavior in Treatment II; V. Comparison with Previous Experimental Results; 5. Cascade trading behavior in Treatment II; 6. No trade in Treatment II; VI. Individual Behavior; 7. Percentage of decisions in accordance with the theoretical prediction at individual level.; VII. Conclusions; 8. Regressions of the level of rationality in the experiment on individual characteristics. P-values in parenthesis

9. Regression of subjects' payoff at the end of the experiment on individual characteristics. P-values in parenthesis10. Regressions of participants' proportion of herding, contrarianism and no trading on the trader's dummy. Herd 1 and Contrarian 1 refer to Treatment I. Herd 2 and Contrarian 2 refer to Treatment II. P-values in parenthesis; References

Notes:

Description based upon print version of record.

Includes bibliographical references.

Description based on online resource; title from PDF front page (ebrary, viewed February 25, 2014).

ISBN:

9786612840920

9781462314430

1462314430

9781452740003

1452740003

9781282840928

1282840924

9781451869996

1451869991

OCLC:

252901774