Information risk, market stress and institutional herding in financial markets : new evidence through the lens of a simulated model

Christopher Boortz; Stephanie Kremer; Simon Jurkatis; Dieter Nautz

This paper employs numerical simulations of the Park and Sabourian (2011) herd model to derive new theory-based predictions for how information risk and market stress influence aggregate herding intensity. We test these predictions empirically using a comprehensive data set of highfrequency and investor-specific trading data from the German stock market. Exploiting intra-day patterns of institutional trading behavior, we confirm that higher information risk increases both buy and sell herding. The model also explains why buy, not sell, herding is more pronounced during the financial crisis.

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Year of publication:	2014
Authors:	Boortz, Christopher ; Kremer, Stephanie ; Jurkatis, Simon ; Nautz, Dieter
Publisher:	Berlin : SFB 649, Economic Risk
Subject:	Herd behavior \| information risk \| financial crisis \| institutional trading \| model simulation \| Bootstrap \| expectile regression \| Goodness-of-fit tests \| quantile treatment effect \| smoothing and nonparametric regression \| Simulation \| Herdenverhalten \| Herding \| Theorie \| Theory \| Regressionsanalyse \| Regression analysis \| Finanzmarkt \| Financial market \| Finanzkrise \| Financial crisis \| Nichtparametrisches Verfahren \| Nonparametric statistics \| Schätzung \| Estimation \| Bootstrap-Verfahren \| Bootstrap approach \| Anlageverhalten \| Behavioural finance \| Börsenkurs \| Share price \| Institutioneller Investor \| Institutional investor