Using a model without conflicts of interest and with identical information available to equity analysts, we show that bias and herding in their stock recommendations occur due to incentives provided by relative performance evaluation and top awards. Furthermore, these incentives also lead to...

This document presents supporting materials for the following publication: Zhang, Juanjuan and Peng Liu (2012), "Rational Herding in Microloan Markets," Management Science, Vol. 58, No. 5, May, pp. 892-912.Microloan markets allow individual borrowers to raise funding from multiple individual...

Rational and irrational herding simultaneously exists in online P2P lending markets. Rational herding decreases the default rate and is viewed as “good money”, while irrational herding increases the default rate and view as “bad money”. Considering the existence of information asymmetry...

In this article, we show experimentally that individuals can adapt their decision making to social environments, like markets, and respond strategically to biases, such as regret aversion. We find they can employ herding as a behaviorally rational strategy to improve their expected outcomes and...