Herding in financial markets: a review of the literature

Abstract

Purpose – The purpose of this paper is to provide a review of theory and empirical evidence on herding behavior in financial markets. Design/methodology/approach – Review and discussion of the literature. Findings – More than two decades of empirical and theoretical research have provided a significant insight on investor herding behavior. Research limitations/implications – The discussion indicates that there are still open issues and areas with inconclusive evidence, e.g. the author knows relatively little for markets other than equity markets. Practical implications – The paper may need empirical methodologies to evaluate herding that address current limitations. Originality/value – The paper reviews recent empirical evidence and identifies open issues for future research.