1992/09/01 by Kenneth Froot, David Scharfstein, Jeremy C. Stein · 1 citation
Economics, Econometrics and Finance · #Financial Markets and Investment Strategies #Complex Systems and Time Series Analysis #Economic theories and models #Speculation #Herding #Asset (computer security) #Financial economics #Economics #Herd behavior #Term (time) #Monetary economics #Finance #Computer science
paper · doi:10.1111/j.1540-6261.1992.tb04665.x
openalex publication_date 1992/09/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/29
ABSTRACT Standard models of informed speculation suggest that traders try to learn information that others do not have. This result implicitly relies on the assumption that speculators have long horizons, i.e., can hold the asset forever. By contrast, we show that if speculators have short horizons, they may herd on the same information, trying to learn what other informed traders also know. There can be multiple herding equilibria, and herding speculators may even choose to study information that is completely unrelated to fundamentals.