herding on fundamental information a comparative study this paper tests for herding towards the market consensus for us and uk leading stocks and to the best of our knowledge addresses a gap in the literature regarding the importance of major fundamental macroeconomic announcements the results indicate that us investors tend to herd during days when important macro data are released and that there have been herding spill over effects from the us to the uk during earlier financial crises further results reveal more differences in herding behavior between the two markets in the us we find that investors herd due to both fundamentals and non fundamentals during different crises when in the uk there is herding only due to fundamentals and only during the dotcom bubble burst these results suggest that the drivers of herding behavior are period and country specific

security analysis and trading patterns when some investors receive information before others in existing models of information acquisition all informed investors receive their information at the same time this article analyzes trading behavior and equilibrium information acquisition when some investors receive common private information before others the model implies that under some conditions investors will focus only on a subset of securities herding while neglecting other securities with identical exogenous characteristics in addition the model is consistent with empirical correlations that are suggestive of oft cited trading strategies such as profit taking short term position reversal and following the leader mimicking earlier trades in existing models of information acquisition all informed investors receive their information at the same time while these models provide many important insights in reality some investors either fortuitously or owing to superior skill acquire pertinent information before others by being first an investor can exploit this information to great advantage information that is uncovered only slightly later is less valuable even if it has not yet been publicly revealed we show in this article that the sequential nature of information arrival has a significant effect on both the trading decisions and the types of information collected by investors the model we develop describes the investment choices of a set of competitive risk averse investors who investigate the long term prospects of firms lucky or high ability investors uncover the

institutional herding in international markets abstract this paper studies herding behavior of institutional investors in international markets first we document the existence of wide spread herding in 41 countries referred to as target countries hereafter in the sample we then examine the relation between contemporaneous institutional demand and future returns and find that institutional herding stabilizes prices next we examine the relation between institutional investors herding behavior and the level of information asymmetry in the target countries we measure the degree of information asymmetry in each target country along five dimensions 1 stock market development 2 ease of access to information 3 corporate transparency 4 investor rights and 5 macroeconomic factors that relate to the information environment we find evidence that institutional investors herd more in markets characterized by low levels of information asymmetry high level of information transparency this result suggests that institutional investors herding behavior is likely driven by correlated signals from fundamental information lastly we show that price adjustment is faster in informationally transparent markets

momentum investment strategies portfolio performance and herding a study of mutual fund behavior this study analyzes the extent to which mutual funds purchase stocks based on their past returns as well as their tendency to exhibit herding behavior i e buying and selling the same stocks at the same time the authors find that 77 percent of the mutual funds were momentum investors buying stocks that were past winners however most did not systematically sell past losers on average funds that invested on momentum realized significantly better performance than other funds the authors also find relatively weak evidence that funds tended to buy and sell the same stocks at the same time copyright 1995 by american economic association

optimal stalling when bargaining this paper analyzes an alternating offer model of bargaining over the sale of an asset in a market such as that for housing in which another agent may come and compete for the right to strike a deal the analysis allows the buyer and seller to have possibly differing views as to how likely such a competition is hence the buyer and the seller disagree about their respective bargaining powers these views adjust to market realizations as the parties learn it is shown that there exists a unique subgame perfect equilibrium which can be explicitly constructed hence conditional on market conditions equilibrium prices and optimal stall lengths that is delay can be found bargaining delay can only occur if there is optimism not pessimism and only if the parties are open to learning as time elapses this delay can occur even for very small levels of optimism and the delay can be for economically significant periods

non linear pricing with a general cost function abstract in this paper we treat the one good monopolist non linear pricing problem with a general cost function if the monopolist sees the consumer type as the realization of a random variable then the solution is obtained by the usual pointwise maximization method however if the distribution of consumers types is the realized distribution of buyers then the solution is harder and is presented here

equity and time to sale in the real estate market evidence from the boston condominium market of the early 1990s reveals that an owner s equity position determines his experience as a seller an owner of a property with a high loan to value ratio sets a higher asking price has a higher expected time on the market and if he sells receives a higher price than an owner with proportionately less debt the down payment requirement for purchasers but not incumbent owners provides a simple explanation for this phenomenon among owner occupants the results provide supporting evidence for equity based aggregate theories of price volume movements in the housing market copyright 1997 by american economic association

rational herding in financial economics abstract this paper briefly describes recent papers on the economics of rational herding in financial markets some models can predict perfect herding in which rational agents all act alike without any countervailing force such herding typically arises either from direct payoff externalities negative externalities in bank runs positive externalities in the generation of trading liquidity or in information acquisition principal agent problems based on managerial desire to protect or signal reputation or informational learning cascades the paper also provides a few pointers to related literature and suggests issues to be addressed in future research

costly search and mutual fund flows this paper studies the flows of funds into and out of equity mutual funds consumers base their fund purchase decisions on prior performance information but do so asymmetrically investing disproportionately more in funds that performed very well the prior period search costs seem to be an important determinant of fund flows high performance appears to be most salient for funds that exert higher marketing effort as measured by higher fees flows are directly related to the size of the fund s complex as well as the current media attention received by the fund which lower consumers search costs

loss aversion in a consumption savings model abstract we propose a model of consumption and saving based on kahneman and tversky s prospect theory that implies a fundamental asymmetry in consumption behavior inconsistent with other models of consumption when there is sufficient income uncertainty a person resists lowering consumption in response to bad news about future income this resistance is greater than the resistance to increasing consumption in response to good news we present empirical evidence from five countries that confirms this behavior

cost functions in non linear pricing abstract this paper compares the optimal selling strategies with symmetric and asymmetric information when monopolist s cost function depends both on individual and aggregate production we show how standard underproduction and higher exclusion with incomplete information are affected

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

firm specific and macro herding by professional and amateur investors and their effects on market volatility we find a herding tendency among both amateur and professional investors and conclude that the propensity to herd is lower in the professionals these results are obtained both when we consider herding into individual stocks and herding into stocks in general herding depends on the firm s systematic risk and size and the professionals are less sensitive to these variables the differences between the amateurs and the professionals may be attributable to the latter s superior financial training most of the results are consistent with the theory that herding is information based we also find that the herding behavior of the two groups is a persistent phenomenon and that it is positively and significantly correlated with stock market returns volatility finally herding mainly by amateurs causes market volatility in the granger causality sense

what is the role of the asking price for a house abstract this paper considers the role of the asking price in housing transactions both theoretically and empirically significant fractions of housing transactions involve sales prices that are either below or above asking price which might suggest that asking price has limited relevance however many housing transactions involve a sales price exactly equal to asking price a fact that has previously drawn little notice strongly suggesting that asking price does matter the paper develops a model where asking price is neither a binding commitment nor a ceiling yet still directs buyer search and impacts sales price using novel survey data the paper provides empirical evidence consistent with asking price playing a directing role in buyer search consistent with theory this effect is stronger for more atypical houses and in bust markets

of tournaments and temptations an analysis of managerial incentives in the mutual fund industry we test the hypothesis that when their compensation is linked to relative performance managers of investment portfolios likely to end up as losers will manipulate fund risk differently than those managing portfolios likely to be winners an empirical investigation of the performance of 334 growth oriented mutual funds during 1976 to 1991 demonstrates that mid year losers tend to increase fund volatility in the latter part of an annual assessment period to a greater extent than mid year winners furthermore we show that this effect became stronger as industry growth and investor awareness of fund performance increased over time

the stability of uk risk measures and the problem of thin trading this paper examines the problems of estimating risk measures and their stability in thin markets it shows analytically that conventional approaches used in previous studies can lead to serious overestimates of the stability of risk measures when shares are subject to thin trading it then demonstrates using uk data that this is in fact a serious practical problem and that the resultant biases are of precisely the form predicted finally the paper presents reliable evidence on the stability of uk risk measures by using an estimation method designed to avoid thin trading bias using this approach risk measures are found to be as stable in the uk as they are in the usa this paper examines the stability of risk measures in the uk the focus is on providing reliable evidence in a market where many of the shares suffer from thin trading this is important because thin trading can seriously distort stability measures leading to incorrect conclusions indeed this is a problem which has almost certainly afflicted many previous studies of stability the paper makes four main contributions first it shows analytically that thin trading can lead to serious overstatements about stability second it uses uk data to illustrate that this is in fact a serious practical problem and that the biases are of precisely the form predicted this is important for anyone who wishes to interpret previous claims on beta stability in thin markets third the paper presents reliable evidence on the stability of uk betas by using an estimation method designed to avoid thin trading bias besides avoiding bias our

selling a lemon under demand uncertainty we consider a seller who has private information about the quality of her good but is uncertain about buyer arrivals assuming that the high quality seller insists on a price we show that the low quality seller s surplus and pricing strategy crucially depend on buyers knowledge about the demand state if they are also uncertain about demand then demand uncertainty increases the low quality seller s expected payoff and her optimal strategy is to lower the price after some time if buyers know the demand state then demand uncertainty does not affect the low quality seller s payoff but she must employ a sophisticated pricing strategy

mutual fund herding in response to hedge fund herding and the impacts on stock prices abstract we examine whether mutual funds and hedge funds herd after each other and the associated impacts on stock prices we find strong evidence that mutual funds herd into or out of stocks following the herd of hedge funds mutual funds herding measure is positively related to last quarter s hedge fund herding in contrast hedge funds do not follow mutual funds mutual funds following of hedge funds leads to a sharp price reversal in the next quarter whereas hedge fund herding itself does not destabilize prices further a mutual fund s following intensity increases with its past performance the top 30 of mutual funds most active in following hedge funds do so persistently and drastically increase their herding subsequent to intense herding by hedge funds they are also the group driving the above price reversals overall our evidence is consistent with the reputational incentives of mutual fund herding and the associated price destabilization effects

mutual fund herding and stock price crashes abstract we investigate the impact of mutual fund herding behaviours on stock price crashes there are competing hypotheses with respect to how investors herding behaviours are associated with information processing our empirical evidence shows that mutual fund herding is associated with a poor information environment and low disclosure quality more importantly mutual fund herding amplifies stock price crash risk afterwards the main finding is concentrated on buy herding rather than sell herding to mitigate the endogeneity concern we use the 2004 sec mutual fund disclosure regulation change as an exogenous shock and the results hold we further use propensity score matching to alleviate the impact of information asymmetry finally additional analysis reveals that our results are not driven by the price impact hypothesis

fund manager herding a test of the accuracy of empirical results using u k data the portfolio holdings of 268 u k equity mutual funds are employed to test the accuracy of the lakonishok shleifer and vishny 1992 measure of herding and test for herding among u k mutual fund managers after adjusting for the biases in the lsv herding measure the results reveal the existence of a modest amount of fund manager herding in the largest and smallest individual u k stocks but little herding in other stocks or stocks aggregated by industry contrary to previous u s results we find that u k mutual fund managers tend to herd out of large stocks after high excess returns

housing price bubbles new supply and within city dynamics abstract although there is broad recognition that cities differ in their tendency to experience house price bubbles most studies assume away any possibility of within city heterogeneity in response to a bubble we develop a model that suggests that this assumption may be appropriate when markets are rising but can be far from reality on the bust side of a bubble during a housing boom new construction and related supply adjustments by developers ensure stable relative prices between low and high quality segments of the housing market on the bust side of a bubble however reduced housing starts allow demand side forces and mortgage default to create pressure for relative prices to diverge across market segments absent a change in technology as markets recover and new construction rebounds relative prices should revert back to pre crash levels evidence based on 2000 2013 single family home sales in phoenix arizona supports this modeling framework additional evidence also suggests that high rates of mortgage default contributed to divergence in relative prices when markets crashed

the role of the list price in housing markets theory and an econometric model summary houses are routinely sold at prices below but rarely sold at prices above their list prices list prices appear to be price ceilings that preclude the possibility of sales at higher prices this paper presents a theory of sellers behaviour that explains why there are list prices in housing markets and why list prices are distinct from sellers reservation prices the theory forms the basis of an econometric model that has been estimated using data from the baltimore md area the estimated model predicts sale and reservation prices conditional on list prices the predictions of sale prices are considerably more accurate than those obtained from a standard hedonic price regression the estimated model also explains why sellers may not be willing to reduce their list prices even after their houses have remained unsold for long periods of time houses are routinely sold at prices below and are virtually never sold at prices above their list prices the list price of a house appears to be a price ceiling that precludes the possibility of selling at a higher price this phenomenon is stable over time so it is not caused by market disequilibrium what is the role of list prices in housing markets can list prices be used to predict sellers reservation prices can they be used to make predictions of sale prices that are more accurate than predictions obtained from standard hedonic regressions this paper develops an econometric model of the behaviour of sellers in housing markets that answers these questions the model explains why there are list prices in housing markets and how sellers establish list and reservation prices in addition the model predicts sale and reservation prices conditional on list prices the predictions of sale prices are considerably more accurate than those obtained from a hedonic price regression the model also explains why sellers may not be willing to reduce their list prices even after their houses have remained unsold for long periods of time there have been several previous attempts to model the formation of list prices in housing markets guasch and marshall 1985 and stull 1978 developed search models in which list prices must be set but these models do not admit the possibility that sale prices may bse below list prices chinloy 1980 developed a model in which the seller s reservation price is assumed to be a constant fraction of the list price but chinloy did not explain why list and reservation prices are distinct or why they are proportional to one another these difficulties are not present in the model developed in this paper the theory underlying the model is developed in section 2 the model is presented in section 3 estimation results and some applications are given in section 4 additional applications are given in section 5 and concluding comments are given in section 6

an empirical stationary equilibrium search model of the housing market this article specifies and estimates a computationally tractable stationary equilibrium model of the housing market the model is rich and incorporates many of its unique features buyers and sellers simultaneous search behavior heterogeneity in their motivation to trade transaction costs a trading mechanism with posting prices and bargaining and the availability of an exogenous advertising technology that induces endogenous matching estimation uses maximum likelihood methods and multiple listing services data the estimated model is used to simulate housing market outcomes when a the amount of information displayed on housing listings increases and b real estate agent s commission rates change

competitive pricing and efficiency in search equilibrium we consolidate and generalize some results on price determination and efficiency in search equilibrium extending models by rubinstein and wolinsky and by gale heterogeneous buyers and sellers meet according to a general matching technology and prices are determined by a general bargaining condition when the discount rate r and search costs converge to 0 we show that prices in all exchanges are the same and equal the competitive market clearing price given positive search costs efficiency obtains iff bargaining satisfies hosios condition and r 0 when prices are set by third party market makers however we show that search equilibrium is necessarily efficient

causes and consequences of short term institutional herding abstract this paper provides new evidence on the causes and consequences of herding by institutional investors using a comprehensive database of every transaction made by financial institutions in the german stock market we show that institutions exhibit herding behavior on a daily basis herding intensity depends on stock characteristics including past returns and volatility return reversals indicate a destabilizing impact of herds on stock prices in the short term results from panel regressions suggest that herding is mainly unintentional and partly driven by the use of similar risk models our findings confirm the importance of macro prudential aspects for banking regulation

the home selling problem theory and evidence this paper formulates and solves the problem of a homeowner who wants to sell their house for the maximum possible price net of transactions costs including real estate commissions the optimal selling strategy consists of an initial list price with subs equent weekly decisions on how much to adjust the list price until the home is sold or withdrawn from the market the solution also yields a sequence of reservation prices that determine whether the homeowner should accept bids from potential buyers who arrive stochastically over time with an expected arrival rate that is a decreasing function of the list price this model was developed to provide a theoretical explanation for list price dynamics and bargaining behavior observed for a sample of homeowners in england in a new data set introduced by