%0 Generic
%A Cipriani, M.
%A Guarino, A.
%C London, UK
%D 2007
%F discovery:14427
%I ESRC Centre for Economic Learning and Social Evolution
%N 272
%T Herd behavior in financial markets: a field experiment with financial market professionals
%U https://discovery.ucl.ac.uk/id/eprint/14427/
%X 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 in such a way that herding  should never occur, and one in which the presence of event uncertainty  makes herding possible. In the first treatment, traders seldom herd,  in accordance with both the theory and previous experimental evidence  on student subjects. A proportion of traders, however, engage  in contrarianism, something not accounted for by the theory. In the  second treatment, on the one hand, the proportion of herding decisions  increases, but not as much as the theory would suggest; on the  other hand, contrarianism disappears altogether. In both treatments,  in contrast with what theory predicts, subjects sometimes prefer to  abstain from trading, which affects negatively the process of price discovery.