American Economic Review Vol. 80 No. 3 1990
Herd Behavior and Investment
Abstract
This paper examines some of the forces that can lead to herd behavior in investment. Under certain circumstances, managers simply mimic the investment decisions of other managers, ignoring substantive private information. Although this behavior is inefficient from a social standpoint, it can be rational from the perspective of managers who are concerned about their reputations in the labor market. We discuss applications of the model to corporate investment, the stock market, and decision making within firms.
- Volume
- 80
- Issue
- 3
- Pages
- 465-479
- Sources
- bibtex:phds-export.bib