Herding, information uncertainty and investors' cognitive profile

Beatriz Fernández (University of Valladolid, Valladolid, Spain)
Teresa Garcia‐Merino (University of Valladolid, Valladolid, Spain)
Rosa Mayoral (University of Valladolid, Valladolid, Spain)
Valle Santos (University of Valladolid, Valladolid, Spain)
Eleuterio Vallelado (University of Valladolid, Valladolid, Spain)

Qualitative Research in Financial Markets

ISSN: 1755-4179

Publication date: 12 April 2011



The purpose of this paper is to analyze the interaction between the availability of financial information and individuals' cognitive profiles to explain investors' herding behavior.


The authors designed and conducted an experiment to observe the behavior of subjects in three settings, each with a different level of information.


Results confirm that a dependence relation exists between information, investors' behavioral biases and the herding phenomenon. Moreover, the experiment shows that information concerning the number of previous transactions in the market is particularly relevant to explain herding propensity among investors. The findings indicate that the cognitive profile of investors is more relevant as the availability of information increases and the number of previous transactions in the market is low.

Research limitations/implications

Future research should examine further the best way to measure the individual's cognitive profile and its interaction with information limitation in financial markets. The presence of high levels of uncertainty favors herding behavior regardless of inter‐individual differences, and only when the availability of information is high and the number of transactions is low does the subjects' cognitive profile explain the investors' herding behavior. Finally, it is observed that not all public information receives the same attention by investors. The attractiveness of public information requires further attention.

Social implications

The herding phenomenon is difficult to anticipate because there are factors of a very diverse nature that intervene.


The research described in this paper measures investors' cognitive profile to identify the interaction between availability of information, cognitive profile and herding.



Fernández, B., Garcia‐Merino, T., Mayoral, R., Santos, V. and Vallelado, E. (2011), "Herding, information uncertainty and investors' cognitive profile", Qualitative Research in Financial Markets, Vol. 3 No. 1, pp. 7-33. https://doi.org/10.1108/17554171111124595

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