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Impacts of Personality on Herding in Financial Decision-Making

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  • Baddeley, M.
  • Burke, C.
  • Schultz, W.
  • Tobler, T.

Abstract

Experimental analyses have identified significant tendencies for individuals to follow herd decisions, a finding which has been explained using Bayesian principles of statistical inference. This paper outlines the results from a herding task designed to extend these analyses. Empirically, we estimate logistic functions using panel fixed effect estimation techniques to quantify the impact of herd decisions on individuals‘ decisions about whether or not to buy a financial asset. We confirm that there are statistically significant propensities to herd and that social information about others‘ decisions has an impact on individuals‘ decisions. We extend these findings by identifying associations between herding propensities and individual characteristics such as gender, age and specific personality traits including impulsivity and venturesomeness.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe1006.pdf
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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 1006.

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Date of creation: 22 Jan 2010
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Handle: RePEc:cam:camdae:1006

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Web page: http://www.econ.cam.ac.uk/index.htm

Related research

Keywords: herding; social influence; financial decision making; personality;

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Cited by:
  1. Parkinson, S. & Baddeley, M., 2011. "Group Decision-Making: An Economic Analysis of Social Influence and Individual Difference in Experimental Juries," Cambridge Working Papers in Economics 1128, Faculty of Economics, University of Cambridge.

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