• Corpus ID: 17438297

Herd Behavior and Investment

  title={Herd Behavior and Investment},
  author={Robert H. Gertner and Bengt Holmstrom}
This paper presents a theoretical model of herd behavior in investment. Managers mimic the investment decisions of other managers, in the process ignoring their private information about the attractiveness of various alternatives. Although this behavior is inefficient from a social standpoint, it is rational from the perspective of managers who are concerned about their reputations in the labor market. We discuss applications of the model to corporate investment, the stock market, and… 

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