Herding and Contrarianism: A Matter of Preference?

• 成果类型: Article
• 署名作者: Kendall, Chad
• 署名单位: University of Southern California
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/rest_a_01028
• 发表日期: 2023-01
• 页码: 190-205
• 关键词: PROSPECT-THEORY; investment strategies; conditional skewness; financial-markets; BEHAVIOR; MODEL; performance; lotteries; returns; RISK

摘要

Herding and contrarian strategies produce informational inefficiencies when investors ignore private information, instead following or bucking past trends. In a simple market model, I show theoretically that investors with prospect theory preferences generically follow herding or contrarian strategies, but do so because of future returns as opposed to past trends. I conduct a laboratory experiment to test the theory and obtain an estimate of the distribution of preferences in the subject population. I find that approximately 70% of subjects have preferences that induce herding. Using the preference estimates, I quantify informational efficiencies and predict trade behavior in more general environments.