Boortz, Christopher Kremer, Stephanie Jurkatis, Simon Nautz, Dieter
Year of Publication:
SFB 649 Discussion Paper 2014-029
This paper employs numerical simulations of the Park and Sabourian (2011) herd model to derive new theory-based predictions for how information risk and market stress influence aggregate herding intensity. We test these predictions empirically using a comprehensive data set of highfrequency and investor-speci c trading data from the German stock market. Exploiting intra-day patterns of institutional trading behavior, we confirm that higher information risk increases both buy and sell herding. The model also explains why buy, not sell, herding is more pronounced during the financial crisis.
Herd behavior information risk financial crisis institutional trading model simulation Bootstrap expectile regression Goodness-of-fit tests quantile treatment effect smoothing and nonparametric regression