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What drives the herding behavior of individual investors?

Listed author(s):
  • M. Merli

    (LARGE - Laboratoire de recherche en gestion et économie - Université Louis Pasteur - Strasbourg I - Université Robert Schuman - Strasbourg III)

  • T. Roger

    ((Axe de recherche : Finance) - CERAG - Centre d'études et de recherches appliquées à la gestion - Grenoble 2 UPMF - Université Pierre Mendès France - CNRS)

This article intends to provide answers concerning what drives individual investor herding behavior. Our empirical study uses transaction records of 87,373 French individual investors for the period 1999-2006. In a ?first part, we show - using both the traditional Lakonishok et al. (1992) and the more recent Frey et al. (2007) measures - that herding is prevalent and strong among French individual investors. We then show that herding is persistent: stocks on which investors concentrate their trades at time t are more likely to be the stocks on which investors herd at time t+1. In a second part, we focus on the motivations of individual herding behavior. We introduce an investor specific measure of herding which allows us to track the persistence in herding of individual investors. Our results highlight that this behavior is influenced by investor-specifi?c characteristics. We also reveal the fact that individual herding behavior is strongly and negatively linked with investors own past performance.

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Paper provided by HAL in its series Post-Print with number halshs-00650943.

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Date of creation: 21 Sep 2011
Publication status: Published in 3rd Conference of the Academy of Behavioral Finance and Economics, Sep 2011, Los Angeles, United States
Handle: RePEc:hal:journl:halshs-00650943
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00650943
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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