Herd Behavior and Contagion in Financial Markets

@inproceedings{Cipriani2003HerdBA,
  title={Herd Behavior and Contagion in Financial Markets},
  author={Marco Cipriani and Antonio Guarino},
  year={2003}
}
We study a sequential trading financial market where there are gains from trade, i.e., where informed traders have heterogeneous private values. We show that an informational cascade (i.e., a complete blockage of information) arises and prices fail to aggregate information dispersed among traders. During an informational cascade, all traders with the same preferences choose the same action, either following the market (herding) or going against it (contrarianism). We also study financial… CONTINUE READING
Highly Cited
This paper has 59 citations. REVIEW CITATIONS

From This Paper

Topics from this paper.

References

Publications referenced by this paper.
Showing 1-10 of 34 references

Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders

  • L. Glosten, P Milgrom
  • Journal of Financial Economics,
  • 1985
Highly Influential
4 Excerpts

Multidimensional Uncertainty and Herd Behavior in Financial Markets

  • C. Avery, P Zemsky
  • American Economic Review,
  • 1998
Highly Influential
3 Excerpts

A Supply Story: Emerging Markets, High Yield and Primary Market Closures, mimeo, GWU

  • A. Fostel
  • 2005
1 Excerpt

Reputation and Asset Prices: A Theory of Information Cascades and Systematic Mispricing, working paper LSE

  • A. Dasgupta, A. Prat
  • 2005
1 Excerpt

Herd Behavior and Contagion in Financial Markets, mimeo, GWU and UCL

  • M. Cipriani, A. Guarino
  • 2004
1 Excerpt

Rational Herds

  • C. Chamley
  • 2004
3 Excerpts

Similar Papers

Loading similar papers…