We study the effect of transaction costs (e.g. a trading fee or a transaction tax, like the Tobin tax) on the aggregation of private information in financial markets. We analyse a financial market agrave; la Glosten and Milgrom, in which informed and uninformed traders trade in sequence with a...

We study the effect of transaction costs (e.g., a trading fee or a transaction tax, like the Tobin tax) on the aggregation of private information in financial markets. We analyze a financial market agrave; la Glosten and Milgrom, in which informed and uninformed traders trade in sequence with a...

We study herd behavior in a laboratory financial market with financial market professionals. We compare two treatments, one in which the price adjusts to the order flow so that herding should never occur, and one in which event uncertainty makes herding possible. In the first treatment, subjects...

We develop a new methodology for estimating the importance of herd behavior in financial markets. Specifically, we build a structural model of informational herding that can be estimated with financial transaction data. In the model, rational herding arises because of information-event...

We develop a new methodology to estimate herd behavior in financial markets. We build a model of informational herding that can be estimated with financial transaction data. In the model, rational herding arises because of information-event uncertainty. We estimate the model using data on a NYSE...