The Effect of Rating Agencies on Herd Behaviour

Andrea Morone () and Giovanni Ferri

No 22, series from Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari

Abstract: This paper purports to provide some evidence on the effect of rating agencies on herding in financial markets. By means of a laboratory experiment, we investigate the effect and interaction between private and public information. Previous experiments showed that lemmings behaviour can survive in a market context where information is private (Hey and Morone, 2004), and that an experimental market can be very volatile and not efficient in transmitting information (Alfarano et al., 2006). We study experimentally, if socially undesirable behaviour - that survives in a market contest - may be eliminated owing to the presence of rating agencies.

Keywords: herd behaviour; informational cascades; rating agency; bubble (search for similar items in EconPapers)
JEL-codes: C91 D82 D83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta and nep-exp
Date: 2008-11, Revised 2008-11
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Related works:
Working Paper: The Effect of Rating Agencies on Herd Behaviour (2008)
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