The Effect of Rating Agencies on Herd Behaviour

Arbeitspapier

This paper purports to provide some evidence on the effect of rating agencies on herding in financial markets. By means of a laboratory experiment, we investigate the effect and interaction between private and public information. Previous experiments showed that lemmings behaviour can survive in a market context where information is private (Hey and Morone, 2004), and that an experimental market can be very volatile and not efficient in transmitting information (Alfarano et al., 2006). We study experimentally, if socially undesirable behaviour – that survives in a market contest – may be eliminated owing to the presence of rating agencies.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: EERI Research Paper Series ; No. 21/2008

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Asymmetric and Private Information; Mechanism Design ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
• Subject: Herd behaviour ; informational cascades ; rating agency ; bubble

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Ferri, Giovanni ; Morone, Andrea
• Event: Veröffentlichung
• (who): Economics and Econometrics Research Institute (EERI)
• (where): Brussels
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/142532
• Last update: 20.09.2024, 8:22 AM CEST