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Risk Aversion and Herd Behavior in Financial Markets

Abstract : We show that differences in investors risk aversion can generate herd behavior in stock markets where assets are traded sequentially. This in turn prevents markets from being efficient in the sense that Þnancial market prices do not converge to the asset’s fundamental value. The informational efficiency of the market depends on the distribution of the risky asset across risk averse agents. These results are obtained without introducing multidimensional uncertainty.
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Contributor : Antoine Haldemann Connect in order to contact the contributor
Submitted on : Monday, May 16, 2011 - 8:55:09 PM
Last modification on : Sunday, June 26, 2022 - 5:15:49 AM


  • HAL Id : hal-00593657, version 1


Jean-Paul Decamps, Stefano Lovo. Risk Aversion and Herd Behavior in Financial Markets. 2002. ⟨hal-00593657⟩



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