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Reputational Herding in Financial Markets: A Laboratory Experiment

By Andreas Roider and Andrea Voskort

Abstract

We study reputational herding in financial markets in a laboratory experiment. In the spirit of Dasgupta and Prat [2008], career concerns are introduced in a sequential asset market where wages for investors are set by subjects in the role of employers. Employers can observe investment behavior, but not investors' ability types. Thereby, reputational incentives may arise endogenously. We find that a sizable fraction of investors follows an established trend even in a setting where there are no reputational incentives. In a setting where there are reputational concerns, they do not seem to create substantial herd behavior

Topics: 330 Wirtschaft, ddc:330
Publisher: 'Informa UK Limited'
Year: 2016
DOI identifier: 10.1080/15427560.2016.1203322
OAI identifier: oai:epub.uni-regensburg.de:42045
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