Herding and Contrarian Behavior in Financial Markets: An Experimental Analysis
AbstractWe are the first paper to analyze and confirm the existence and extent of rational informational herding and rational informational contrarianism in a financial market experiment, and to compare and contrast these with the equivalent irrational phenomena. In our study, subjects generally behave according to benchmark rationality. Traders who should herd or be contrarian in theory are the significant source of both within the data. Correcting for subjects who chose not to trade at least once (an irrational action in itself), increases our ability to predict herding or contrarian behavior considerabl.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0938.
Date of creation: 12 Oct 2009
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Web page: http://www.econ.cam.ac.uk/index.htm
Herding; Contrarianism; Informational Efficiency; Experiments;
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-24 (All new papers)
- NEP-CBE-2009-10-24 (Cognitive & Behavioural Economics)
- NEP-EXP-2009-10-24 (Experimental Economics)
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- Park, Andreas & Sgroi, Daniel, 2012.
"Herding, contrarianism and delay in financial market trading,"
European Economic Review,
Elsevier, vol. 56(6), pages 1020-1037.
- Park, A. & Sgroi, D., 2009. "Herding, Contrarianism and Delay in Financial Market Trading," Cambridge Working Papers in Economics 0941, Faculty of Economics, University of Cambridge.
- Baddeley, M. & Burke, C. & Schultz, W. & Tobler, P., 2012. "Herding in Financial Behaviour: A Behavioural and Neuroeconomic Analysis of Individual Differences," Cambridge Working Papers in Economics 1225, Faculty of Economics, University of Cambridge.
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