Herding on Ending Digits in Security Trading

This article complements prior literature by distinguishing between buys and sells, and taking a new approach in testing for herding on ending digits. Using a sample of nearly 100 million stock trades, it provides strong evidence in favor of herding on ending digits, particularly in round numbers. Our investigation of what drives investor herding behavior over ending digits finds that the herding effect has a weak but positive association with past returns over a longer horizon. This finding implies that investor preference for round numbers is not only a result of price clustering, but also a consequence of momentum trading.