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A note on risk aversion and herd behavior in financial markets

by: Jean-Paul Decamps, Stefano Lovo
The GENEVA Risk and Insurance Review, Vol. 31, No. 1. (19 July 2006), pp. 35-42, doi:10.1007/s10713-006-9466-x  Key: citeulike:3649279

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Abstract

Abstract  We show that differences in market participants risk aversion can generate herd behavior in stock markets where assets are traded sequentially. This in turn prevents learning of market’s fundamentals. These results are obtained without introducing multidimensional uncertainty or transaction cost.


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