Articlegreen1998

Multidimensional Uncertainty and Herd Behavior in Financial Markets

Christopher Norio Avery · Peter B. Zemsky

748 citations0/0 files storedDigital Access to Scholarship at Harvard (DASH) (Harvard University)

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Financial Markets and Investment Strategies Stochastic processes and financial applications Economic theories and models

Abstract

The authors study the relationship between asset prices and herd behavior, which occurs when traders follow the trend in past trades. When traders have private information on only a single dimension of uncertainty (the effect of a shock to the asset value), price adjustments prevent herd behavior. Herding arises when there are two dimensions of uncertainty (the existence and effect of a shock), but it need not distort prices because the market discounts the informativeness of trades during herding. With a third dimension of uncertainty (the quality of traders' information), herd behavior can lead to a significant, short-run mispricing. Copyright 1998 by American Economic Association.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 748 citations exist upstream.

References

1992A Simple Model of Herd Behavior 1985Bid, ask and transaction prices in a specialist market with heterogeneously informed traders 1980On the Impossibility of Informationally Efficient Markets 1982Information, trade and common knowledge 1990The Noise Trader Approach to Finance 1984Stock Prices and Social Dynamics 1996Rational herding in financial economics 1992Time and the Process of Security Price Adjustment

Cited by

2005Information Uncertainty and Expected Returns 2008Manipulation and the Allocational Role of Prices 2005Does herding behavior exist in Chinese stock markets?2001Asset Pricing under Asymmetric Information 2001Procyclicality of the financial system and financial stability: Issues and policy options 2002Multifractality in Asset Returns: Theory and Evidence 2020

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.