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Teoria dei Processi Imitativi e Applicazioni Economiche

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  • Marco Arnone

    (IMF & Catholic University of Milan)

Abstract

This paper provides a survey of recent theories of herding behaviour, bridging two rather distants strands of literature (roughly, American and European). In the first part of the paper the explanation is based on the idea of asymmetric information and principal-agent approach; these could lead to an over-estimation of public information and under- estimation of private information, leading to informational cascades and interruption of social learning. The second part reviews the second strand of literature on herding, where transition probabilities from one strategy to another, which are stochastic at intividual level, give rise to quasi-deternimistic paths at aggregate level. The concept of self- referential and hetero-referential systems are introduced. Feb. 2004

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File URL: http://128.118.178.162/eps/if/papers/0404/0404012.pdf
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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0404012.

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Length: 34 pages
Date of creation: 13 Apr 2004
Date of revision:
Handle: RePEc:wpa:wuwpif:0404012

Note: Type of Document - pdf; pages: 34. This paper provides a survey of recent theories of herding behaviour, bridging two rather distants strands of literature (roughly, American and European).
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Web page: http://128.118.178.162

Related research

Keywords: Herd behaviour; informational cascades; asymmetric information; learning; self-organisation; exchange rate; bubbles; financial crises;

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References

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  1. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
  2. Chamley, Christophe & Gale, Douglas, 1994. "Information Revelation and Strategic Delay in a Model of Investment," Econometrica, Econometric Society, vol. 62(5), pages 1065-85, September.
  3. Gary S. Becker, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," University of Chicago - George G. Stigler Center for Study of Economy and State 67, Chicago - Center for Study of Economy and State.
  4. Taylor, Mark P, 1989. "Charts, Noise and Fundamentals: A Study of the London Foreign Exchange Market," CEPR Discussion Papers 341, C.E.P.R. Discussion Papers.
  5. Avery, Christopher & Zemsky, Peter, 1998. "Multidimensional Uncertainty and Herd Behavior in Financial Markets," American Economic Review, American Economic Association, vol. 88(4), pages 724-48, September.
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