We designed four observational learning experiments to identify the key channels that, along with Bayes-rational inferences, drive herd behavior. In Experiment 1, unobserved, whose actions remain private, learn from the public actions made in turn by subjects endowed with private signals of...

Most real world situations that are susceptible to herding are also characterized by direct payoff externalities. Yet, the bulk of the theoretical and experimental literature on herding has focused on pure informational externalities. In this paper we experi- mentally investigate the effects of...

Most real world situations that are susceptible to herding are also characterized by direct payoff externalities. Yet, the bulk of the theoretical and experimental literature on herding has focused on pure informational externalities. In this paper we experi- mentally investigate the effects of...

We investigate the effect of introducing information about peer portfolios in an experimental Arrow-Debreu economy. Confirming the prediction of a general equilibrium model with inequality averse preferences, we find that peer information leads to reduced variation in payoffs within peer groups....

As expectations are driven by information, its selection is central in explaining common knowledge building and unraveling in financial markets. This paper addresses this information selection problem by proposing imitation as a key mechanism to explain opinion dynamics. Behavioral and cognitive...

This paper studies “attention cascade” in a delegated portfolio management setting. Empirically, “attention cascades” refer to two types of (related) cascade. First, investors would pay more attention to the mutual funds that hold more stocks which have grabbed the investors' attention....

We propose a model of asset management in which benchmarking arises endogenously, and analyze its unintended welfare consequences. Fund managers' portfolios are unobservable and they incur private costs in running them. Conditioning managers' compensation on a benchmark portfolio's performance...

We find that bidders are more likely to hold conference calls at merger announcements when the mergers are financed with stock and when the transactions are large. After controlling for endogeneity, we also find that conference calls are associated with more favorable market reactions to merger...