A note on risk aversion and herd behavior in financial markets

We show that differences in market participants risk aversion can generate herd behavior in stock markets where assets are traded sequentially. This in turn prevents learning of market's fundamentals. These results are obtained without introducing multidimensional uncertainty or transaction cos...

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Veröffentlicht in:	Geneva Papers on Risk and Insurance Theory 2006-07, Vol.31 (1), p.35-42
Hauptverfasser:	Decamps, Jean-Paul, Lovo, Stefano
Format:	Artikel
Sprache:	eng
Schlagworte:	Behavior Bids Business administration C11 Capital market Consumer behavior D82 domain_shs.gestion.fin Economic uncertainty Economics and Finance Expected values Finance Financial research Financial risk Financial risks Financial Services G14 Herd behavior Herding Humanities and Social Sciences Insurance Inventories Inventory Investment risk Market analysis Market prices Original Paper Prices Reservation prices Risk aversion Risk Management Securities markets Stock exchanges Studies Trade
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Beschreibung
Zusammenfassung:	We show that differences in market participants risk aversion can generate herd behavior in stock markets where assets are traded sequentially. This in turn prevents learning of market's fundamentals. These results are obtained without introducing multidimensional uncertainty or transaction cost.
ISSN:	1554-964X 1554-9658
DOI:	10.1007/s10713-006-9466-x