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Herding and Social Pressure in Trading Tasks: A Behavioural Analysis


Type

Working Paper

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Authors

Baddeley, Michelle 
Pillas, Demetris 
Christopoulos, Yorgos 
Schultz, Wolfram 
Tobler, Phillipe 

Abstract

We extend the experimental literature on Bayesian herding using evidence from a financial decision-making experiment. We identify significant propensities to herd increasing with the degree of herd-consensus. We test various herding models to capture the differential impacts of Bayesian-style thinking versus behavioural factors. We find statistically significant associations between herding and individual characteristics such as age and personality traits. Overall, our evidence is consistent with explanations of herding as the outcome of social and behavioural factors. Suggestions for further research are outlined and include verifying these findings and identifying the neurological correlates of propensities to herd.

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Keywords

herding, Bayesian updating, social learning, social pressure

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Publisher

Faculty of Economics

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