Jump to ContentJump to Main Navigation
Show Summary Details
More options …

The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan

2 Issues per year

IMPACT FACTOR 2017: 0.220
5-year IMPACT FACTOR: 0.328

CiteScore 2017: 0.28

SCImago Journal Rank (SJR) 2017: 0.181
Source Normalized Impact per Paper (SNIP) 2017: 0.459

Mathematical Citation Quotient (MCQ) 2017: 0.09

See all formats and pricing
More options …

Herd Behavior and Contagion in Financial Markets

Marco Cipriani / Antonio Guarino
Published Online: 2008-10-06 | DOI: https://doi.org/10.2202/1935-1704.1390

We study a sequential trading financial market where there are gains from trade, that is, where informed traders have heterogeneous private values. We show that an informational cascade (i.e., a complete blockage of information) arises and prices fail to aggregate information dispersed among traders. During an informational cascade, all traders with the same preferences choose the same action, following the market (herding) or going against it (contrarianism). We also study financial contagion by extending our model to a two-asset economy. We show that informational cascades in one market can be generated by informational spillovers from the other. Such spillovers have pathological consequences, generating long-lasting misalignments between prices and fundamentals.

Keywords: herd behavior; financial contagion; social learning; informational cascades; financial crises

About the article

Published Online: 2008-10-06

Citation Information: The B.E. Journal of Theoretical Economics, Volume 8, Issue 1, ISSN (Online) 1935-1704, DOI: https://doi.org/10.2202/1935-1704.1390.

Export Citation

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston.Get Permission

Citing Articles

Here you can find all Crossref-listed publications in which this article is cited. If you would like to receive automatic email messages as soon as this article is cited in other publications, simply activate the “Citation Alert” on the top of this page.

Kimiko Sugimoto and Takashi Matsuki
Journal of the Japanese and International Economies, 2018
Guocheng Wang and Yanyi Wang
Economic Modelling, 2017
Simone Nuzzo and Andrea Morone
Journal of Behavioral and Experimental Finance, 2017, Volume 13, Page 42
Roberto Casarin, Flaminio Squazzoni, and Rodrigo Huerta-Quintanilla
PLoS ONE, 2013, Volume 8, Number 7, Page e67721
James C. D. Fisher and John Wooders
Economic Theory, 2017, Volume 63, Number 1, Page 211
Ivan Ivanov, Stanimir Kabaivanov, and Boryana Bogdanova
Research in International Business and Finance, 2016, Volume 37, Page 360
Frank Heinemann and Charles Noussair, Charles Noussair, and Yilong Xu
Journal of Economic Studies, 2015, Volume 42, Number 6, Page 1029
Filip Angela-Maria, Pece Andreea Maria, and Pochea Maria Miruna
Procedia Economics and Finance, 2015, Volume 25, Page 354
Darren Duxbury
Review of Behavioural Finance, 2015, Volume 7, Number 1, Page 78
Saumitra N. Bhaduri and Siddharth D. Mahapatra
Journal of Asian Economics, 2013, Volume 25, Page 43
Bryan Y. Lim
Journal of Banking & Finance, 2011, Volume 35, Number 9, Page 2443
Zhuo Qiao, Thomas C. Chiang, and Lin Tan
Review of Pacific Basin Financial Markets and Policies, 2014, Volume 17, Number 03, Page 1450018
Elisabete F. Simões Vieira and Márcia S. Valente Pereira
Revista de Contabilidad, 2015, Volume 18, Number 1, Page 78
Erik Eyster, Andrea Galeotti, Navin Kartik, and Matthew Rabin
Games and Economic Behavior, 2014, Volume 87, Page 519
Antonio Guarino and Marco Cipriani
IMF Working Papers, 2010, Volume 10, Number 288, Page 1
Zhiyong Dong, Qingyang Gu, and Xu Han
Applied Financial Economics, 2010, Volume 20, Number 4, Page 331
Fabrizio Durante and Piotr Jaworski
Applied Stochastic Models in Business and Industry, 2010, Volume 26, Number 5, Page 551

Comments (0)

Please log in or register to comment.
Log in