The Effect of Rating Agencies on Herd Behaviour

Andrea Morone and Giovanni Ferri

No 22, SERIES from Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro"

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)
Pages: 828
Date: 2008-11, Revised 2008-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The effect of rating agencies on herd behaviour (2014)
Working Paper: The Effect of Rating Agencies on Herd Behaviour (2008)
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