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Institutional Herding in Financial Markets: New Evidence through the Lens of a Simulated Model

Christopher Boortz, Simon Jurkatis, Stephanie Kremer and Dieter Nautz ()

No 1336, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Due to data limitations and the absence of testable, model-based predictions, theory and evidence on herd behavior are only loosely connected. This paper contributes towards closing this gap in the herding literature. We use numerical simulations of a herd model to derive new, theory-based predictions for aggregate herding intensity. Using high-frequency, investor-specific trading data we confirm the predicted impact of information risk on herding. In contrast, the increase in buy herding measured for the financial crisis period cannot be explained by the herd model.

Keywords: Herd Behavior; Institutional Trading; Model Simulation (search for similar items in EconPapers)
JEL-codes: G11 G24 (search for similar items in EconPapers)
Pages: 40 p.
Date: 2013
New Economics Papers: this item is included in nep-cmp and nep-mst
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Working Paper: Institutional herding in financial markets: New evidence through the lens of a simulated model (2014) Downloads
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