Herding with leading traders: evidence from a laboratory social trading platform

Chmura, T ORCID: https://orcid.org/0000-0001-7476-2030, Le, H and Nguyen, K, 2022. Herding with leading traders: evidence from a laboratory social trading platform. Journal of Economic Behavior and Organization, 203, pp. 93-106. ISSN 0167-2681

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Abstract

We provide novel evidence about herd behavior and its impact on asset price bubbles in an experimental financial market. We find that traders imitate quotes of those with the highest wealth increases as ranked on the leader-boards, despite that no traders possess private value-related information and that wealth increases are not due to trading skills. Most remarkably, we find that herd behavior does not produce more price bubbles and the awareness of information asymmetry leads to fewer bubbles as risk-averse traders become more cautious and do not quote prices too far from the fundamental value. We also find that participants with financial training have a lower herding tendency and markets with these participants exhibit less mispricing.

Item Type:	Journal article
Publication Title:	Journal of Economic Behavior and Organization
Creators:	Chmura, T., Le, H. and Nguyen, K.
Publisher:	Elsevier BV
Date:	November 2022
Volume:	203
ISSN:	0167-2681
Identifiers:	Number Type 10.1016/j.jebo.2022.08.035 DOI 1832339 Other
Rights:	© 2022 The Authors. Under a Creative Commons license
Divisions:	Schools > Nottingham Business School
Record created by:	Jeremy Silvester
Date Added:	14 Nov 2024 11:15
Last Modified:	14 Nov 2024 11:15
URI:	https://irep.ntu.ac.uk/id/eprint/52563

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