This paper provides an overview of the recent theoretical and empirical research on herd behavior in financial markets. It looks at what precisely is meant by herding, the causes of herd behavior, the success of existing studies in identifying the phenomenon, and the effect that herding has on financial markets. Copyright 2001, International Monetary Fund

Sunil Sharma

Sushil Bikhchandani

English

Research Papers in Economics

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Financial Crises as Herds,” (unpublished; Minneapolis: Federal Reserve Bank of Minneapolis).

Following the Pied Piper:

Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk,”

Herd on the Street: Informational Efficiencies in a Market with Short-term Speculation,”

Herding among Investment Newsletters: Theory and Evidence,”

Herding Among Security Analysts,”

Herding and Delegated Portfolio Management” (unpublished; London: London Business School).

Herding and Feedback Trading by

Herding, Trade Reversals, and Cascading by Institutional Investors,” (unpublished;

Idiosyncratic Risk: An Empirical Analysis, with Implications for the Risk of Relative-Value Trading Strategies,” IMF Working Paper 99/148,

Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning,”

Irrational Exuberance,

Learning from the Behavior of Others: Conformity,

Market Crashes and Information Avalanches,” (unpublished;

Momentum Investment Strategies, Portfolio Performance, and Herding:

Multidimensional Uncertainty and Herd Behavior in

Mutual Fund Herding and the Impact on Stock Prices,”

Offshore Investment Funds: Monsters in Emerging Markets,” Working Paper No. 7133,

Positive Feedback Investment Strategies and Destabilizing Rational Speculation,”

Private Information for Foreign Investment in Emerging Economies,” (unpublished;

Rational Herd Behavior and Globalization of Securities Markets,”

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Security Analysts’ Career Concerns and Herding of Earnings Forecasts,”

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Herd Behavior in Financial Markets

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