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A note on risk aversion and herd behavior in financial markets |
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| Authors: | Jean-Paul Decamps Stefano Lovo |
| Affiliation: | (1) GREMAQ-IDEI Université de Toulouse 1, 21 Allee de Brienne, 31000 Toulouse, France;(2) Europlace Institute of Finance, France;(3) HEC, Finance and Economics Department, 1 Rue de la Liberation, 78351 Jouy en Josas, France |
| Abstract: | We show that differences in market participants risk aversion can generate herd behavior in stock markets where assets are traded sequentially. This in turn prevents learning of market’s fundamentals. These results are obtained without introducing multidimensional uncertainty or transaction cost. JEL Classification G1 · G14 · C11 · D82 |
| Keywords: | Herd behavior Risk aversion |
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