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Herding And Social Pressure In Trading Tasks: A Behavioural Analysis

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Author Info
Baddeley, M.
Pillas, D.
Christopoulos, Y.
Schultz, W.
Tobler, P.

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Abstract

We extend the experimental literature on Bayesian herding using evidence from a financial decision-making experiment. We identify significant propensities to herd increasing with the degree of herd-consensus. We test various herding models to capture the differential impacts of Bayesian-style thinking versus behavioural factors. We find statistically significant associations between herding and individual characteristics such as age and personality traits. Overall, our evidence is consistent with explanations of herding as the outcome of social and behavioural factors. Suggestions for further research are outlined and include verifying these findings and identifying the neurological correlates of propensities to herd.

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File URL: http://www.econ.cam.ac.uk/dae/repec/cam/pdf/cwpe0730.pdf
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Publisher Info
Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0730.

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Length: 29
Date of creation: May 2007
Date of revision:
Handle: RePEc:cam:camdae:0730

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Related research
Keywords: Herding; Bayesian updating; social learning; social pressure;

Find related papers by JEL classification:
D7 - Microeconomics - - Analysis of Collective Decision-Making
D8 - Microeconomics - - Information, Knowledge, and Uncertainty
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information

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