Estimating a structural model of herd behavior in financial markets

Arbeitspapier

We develop a new methodology for estimating the importance of herd behavior in financial markets. Specifically, we build a structural model of informational herding that can be estimated with financial transaction data. In the model, rational herding arises because of information-event uncertainty. We estimate the model using 1995 stock market data for Ashland Inc., a company listed on the New York Stock Exchange. Herding occurs often and is particularly pervasive on certain days. In an information-event day, on average, 2 percent (4 percent) of informed traders herd-buy (sell). In 7 percent (11 percent) of information-event days, the proportion of informed traders who herd-buy (sell) is greater than 10 percent. Herding causes important informational inefficiencies, amounting, on average, to 4 percent of the asset's expected value.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Staff Report ; No. 561

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Information and Market Efficiency; Event Studies; Insider Trading ; Asymmetric and Private Information; Mechanism Design ; Estimation: General
• Thema: herd behavior ; market microstructure ; structural estimation

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Cipriani, Marco ; Guarino, Antonio
• Ereignis: Veröffentlichung
• (wer): Federal Reserve Bank of New York
• (wo): New York, NY
• (wann): 2012

Weitere Informationen

• Handle: http://hdl.handle.net/10419/60944
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ