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Social Influence in Stockmarkets: A Conceptual Analysis of Social Influence Processes in Stock Markets

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Author Info

  • Biel, Anders

    ()
    (Department of Psychology, University of Gothenburg, Gothenburg, Sweden)

  • Andersson, Maria

    (Department of Psychology, University of Gothenburg, Gothenburg, Sweden)

  • Hedesström, Martin

    (Department of Psychology, University of Gothenburg, Gothenburg, Sweden)

  • Jansson, Magnus

    (Department of Psychology, University of Gothenburg, Gothenburg, Sweden)

  • Sundblad, Eva-Lotta

    (Department of Psychology, University of Gothenburg, Gothenburg, Sweden)

  • Gärling, Tommy

    (Department of Psychology, University of Gothenburg, Gothenburg, Sweden)

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    Abstract

    This paper focuses on the role of social factors for booms-bubbles-busts cycles in stock markets. It is argued that indirect and direct social influences are important contributors by reinforcing stock investors’ cognitive biases exaggerated by affective influences. A review of herding research primarily undertaken by financial economists is followed by a demonstration that psychological theories of direct social influence (imitation) have bearings on the understanding of the herding phenomenon in stock markets. How to continue this research with relevance for regulations of stock markets is discussed.

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    Bibliographic Info

    Paper provided by Sustainable Investment Research Platform in its series Sustainable Investment and Corporate Governance Working Papers with number 2010/13.

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    Length: 15 pages
    Date of creation: 01 Jul 2010
    Date of revision:
    Handle: RePEc:hhb:sicgwp:2010_013

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    Keywords: Social influence; stock investments; conceptual analysis;

    This paper has been announced in the following NEP Reports:

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