The Herd Behavior and the Financial Instability
AbstractGiven the international financial situation of the last 50 years, and considering the complexity and severity of the financial crises, it is important to study the episodes of financial instability, and especially to understand both operating mechanisms and propagation mechanisms. One endogenous mechanism of financial instability is the herd behavior, which may increase the volatility and the amplitude of any sub-part of the financial system. This paper aims to analyze this phenomenon, considering the behavior of the financial market participants, the role of information in the making decisions process, banking responsibility regarding the herd behavior. The paper also illustrates two examples of herd behavior (run bank and the "too many to fail" problem), and presents three herding measures, in an attempt to achieve a quantitative analysis of the phenomenon, besides the qualitative analysis exposed above.
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Bibliographic InfoArticle provided by University of Petrosani, Romania in its journal Annals of the University of Petrosani - Economics.
Volume (Year): 12 (2012)
Issue (Month): 1 ()
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Web page: http://www.upet.ro/
financial instability; herd behavior; financial markets; information; signals;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Charles Goodhart & Miguel Segoviano, 2009. "Banking Stability Measures," FMG Discussion Papers dp627, Financial Markets Group.
- Alexandra Lai, 2002. "Modelling Financial Instability: A Survey of the Literature," Working Papers 02-12, Bank of Canada.
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