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Article
Publication date: 12 March 2018

Oksana Doherty

The purpose of this paper is to review recent contributions to the theoretical and empirical literature on informational cascades.

Abstract

Purpose

The purpose of this paper is to review recent contributions to the theoretical and empirical literature on informational cascades.

Design/methodology/approach

This paper reviews and synthesises the existing literature, methodologies and evidence on informational cascades.

Findings

Many financial settings foster situations where informational cascades and herding are likely. Cascades remain mainly an area of experimental research, leaving the empirical evidence inconclusive. Existing measures have limitations that do not allow for a direct test of cascading behaviour. More accurate models and methods for empirical testing of informational cascades could provide more conclusive evidence on the matter.

Practical implications

Outlined findings have implications for designing policies and regulatory requirements, as well as for the design of collective decisions processes.

Originality/value

The paper reviews and critiques existing theory; it summarises the recent laboratory and empirical evidence and identifies issues for future research. Most of other theoretical work reviews informational cascades as a subsection of herding. This paper focusses on informational cascades specifically. It distinguishes between informational cascade and herding. The paper also reviews most recent empirical evidence on cascades, presents review and synthesis of the theoretical and empirical development on information cascades up to date, and reviews the model of informational cascades with model criticism.

Details

Review of Behavioral Finance, vol. 10 no. 1
Type: Research Article
ISSN: 1940-5979

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Article
Publication date: 15 May 2017

Joohyun Kim, Ohsung Kwon and Duk Hee Lee

The purpose of this paper is to explore how hubs’ social influence on social network decisions can cause the behavior of information cascades in a market.

Abstract

Purpose

The purpose of this paper is to explore how hubs’ social influence on social network decisions can cause the behavior of information cascades in a market.

Design/methodology/approach

The authors establish understanding of the fundamental mechanism of information cascades through a computational simulation approach.

Findings

Eigenvector centrality, betweenness centrality, and PageRank are statistically correlated with the occurrence of information cascades among agents; the hubs’ incorrect decisions in the early diffusion stage can significantly cause misled shift cascades; and the bridge role of hubs is more influential than their pivotal position role in the process of misled shift cascades.

Originality/value

This implication can be extendable in the field of marketing, sequential voting, and technology, or innovation adoption.

Details

Management Decision, vol. 55 no. 4
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 11 November 2014

Qihua Liu and Liyi Zhang

The purpose of this paper is to examine information cascades in the context of users’ e-book reading behavior and differentiate it from alternative factors that lead to…

Abstract

Purpose

The purpose of this paper is to examine information cascades in the context of users’ e-book reading behavior and differentiate it from alternative factors that lead to herd behavior, such as network externalities and word-of-mouth effects.

Design/methodology/approach

This paper constructed panel data using information concerning 226 e-books in 30 consecutive days from Sina.com’s reading channel (Book.Sina.com.cn) from October 2, 2013, to October 31, 2013 of the same year in China. A multinomial logit market-share model was employed.

Findings

E-books’ ranking has a significant impact on their market share, as predicted by informational cascades theory. Higher ranking e-books’ clicks will see a greater increase as a result of an increase in clicks ranking. Due to the information cascades effect, review volume had no impact on the market share of popular e-books. Total votes had a powerful impact on the market share of e-books, showing that once information cascade occurred, it could be enhanced by the increase in total votes. The total clicks of e-books had a significant impact on their market share, suggesting that online reading behavior would be influenced by network externalities.

Practical implications

As important information, the ranking or popularity of e-books should be carefully considered by online reading web sites, publishers, and authors. It is not enough for the authors and publishers of e-books to simply pay attention to the content. They should design their marketing strategies to allow network externalities and informational cascades to work for them, not against them. Online reading web sites should also focus on eliminating certain behavior, such as “brush clicks” and “brush votes,” in order to prevent an undesirable information cascade due to false information.

Originality/value

To the best of the knowledge, this is the first study to examine information cascades in the context of users’ e-book reading behavior. Moreover, this study can help other researchers by utilizing a large sample of daily data from one of the earliest online reading platforms in China.

Details

Library Hi Tech, vol. 32 no. 4
Type: Research Article
ISSN: 0737-8831

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Article
Publication date: 10 January 2019

JiHye Park, JaeHong Park and Ho-Jung Yoon

When purchasing digital content (DC), consumers are typically influenced by various information sources on the website. Prior research has mostly focused on the individual…

Abstract

Purpose

When purchasing digital content (DC), consumers are typically influenced by various information sources on the website. Prior research has mostly focused on the individual effect of the information sources on the DC choice. To fill the gap in the previous studies, this research includes three main effects: information cascades, recommendations and word of mouth. In particular, the purpose of this paper is to focus on the interaction effect of information cascades and recommendations on the number of software downloads.

Design/methodology/approach

The authors use the panel generalized least squares estimation to test the hypotheses by using a panel data set of 2,000 pieces of software at download.cnet.com over a month-long period. Product ranking and recommendation status are used as key independent variables to capture the effects of information cascades and recommendations, respectively.

Findings

One of this study’s findings is that information cascades positively interact with recommendations to influence the number of software downloads. The authors also show that the impact of information cascades on the number of software downloads is greater than one of the recommendations from a distributor does.

Originality/value

Information cascades and recommendations have been considered as the primary effects for online product choices. However, these two effects typically are not considered together in one research. As previous studies have mainly focused on each effect, respectively, the authors believe that this study may fill the gap by examining how these effects are interacted to one other to influence customers’ choices. The authors also show that the impact of information cascades on the number of software downloads is greater than one of the recommendations from a system does.

Details

Online Information Review, vol. 43 no. 5
Type: Research Article
ISSN: 1468-4527

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Article
Publication date: 12 November 2019

Saurabh Gupta and Saumitra N. Bhaduri

The purpose of this paper is to investigate investor behavior under two broad categories, market-wide sentiment and herding.

Abstract

Purpose

The purpose of this paper is to investigate investor behavior under two broad categories, market-wide sentiment and herding.

Design/methodology/approach

Using a dynamic factor model, that extracts distinct latent factors representing fluctuations in asset returns due to changes in fundamentals as well as investors’ sentiments, the paper investigates the impact of investor behavior on asset pricing.

Findings

Consistent with the literature, the results suggest that the behavioral factors play a significant role in explaining variation in the asset prices. However, the degree of influence depends on the nature of the stocks or portfolios. The findings conform to the hypothesis that behavioral factors play a more important role in explaining the price movements of high and medium valued stocks than those of smaller valued stocks. Further, the behavioral factors also exhibit high auto-correlation, depicting the pervasive nature of such factors, and proving that information cascades and other behavioral mechanisms propagate over a period of time leading to bubbles and market crashes. Finally, since herding is often associated with market volatility, the authors test the hypothesis using two measures of volatility and the result shows positive significant associations between them as suggested in the literature.

Originality/value

The paper presents a dynamic factor model to study the impact of investor behavior on asset returns using a conventional three factors model with behavioral factors. A factor model is proposed to extract distinct latent factors representing fluctuations in asset returns due to changes in fundamentals as well as investors’ sentiments. The study investigates investor behavior under two broad categories, market-wide sentiment and herding. Consistent with the literature, the results suggest that the behavioral factors play a significant role in explaining variation in the asset prices. However, the degree of influence depends on the nature of the stocks or portfolios. The findings conform to the hypothesis that behavioral factors play a more important role in explaining the price movements of high and medium valued stocks than those of smaller valued stocks. Further, the behavioral factors also exhibit high auto-correlation, depicting the pervasive nature of such factors, and proving that information cascades and other behavioral mechanisms propagate over a period of time leading to bubbles and market crashes.

Details

Review of Behavioral Finance, vol. 11 no. 4
Type: Research Article
ISSN: 1940-5979

Keywords

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Abstract

Details

The Political Economy of Policy Reform: Essays in Honor of J. Michael Finger
Type: Book
ISBN: 978-0-44451-816-3

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Book part
Publication date: 9 February 2004

NICOLAAS J. VRIEND

Abstract

Details

Economic Complexity
Type: Book
ISBN: 978-0-44451-433-2

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Book part
Publication date: 30 May 2017

Rose Marie Santini, Danilo Silva, Túlio Brasil, Rafael Rezende, Camyla Terra, Heloísa Traiano, Kenzo Seto, Marcela De Orlandis and Clara Rescala

This chapter examines possible relationships between use of social media in online mobilization and mainstream print media coverage during the June 2013 protests in…

Abstract

This chapter examines possible relationships between use of social media in online mobilization and mainstream print media coverage during the June 2013 protests in Brazil, a series of demonstrations which happened throughout the country initially around bus ticket prices.

In order to develop the research, we compared news from leading Brazilian newspapers (O Globo, Folha de S. Paulo, Estadão, and O Dia) with the activities of most influential Twitter users in the dissemination of messages about these events in the country during the period from June 01 to 30, 2013. The results show trends in the emerging dynamics of social organization that may indicate the role of old and new media in today’s Brazilian politics.

The research analyzed the extent to which the events occurring on the streets shaped and/or reflected user-generated social media content.

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Article
Publication date: 12 April 2011

Beatriz Fernández, Teresa Garcia‐Merino, Rosa Mayoral, Valle Santos and Eleuterio Vallelado

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

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Abstract

Purpose

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.

Design/methodology/approach

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

Findings

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.

Originality/value

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

Details

Qualitative Research in Financial Markets, vol. 3 no. 1
Type: Research Article
ISSN: 1755-4179

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Article
Publication date: 1 December 1998

David Collins

Presents a case study concerning the attempts of a particular group of managers to implement an “empowered” system of working within their organization. Rejecting…

Abstract

Presents a case study concerning the attempts of a particular group of managers to implement an “empowered” system of working within their organization. Rejecting managerialist accounts of empowerment as distorted representations of social processes and social action, the paper investigates the “4Cs” of empowerment: context, construction, cascade and contest, within the processes of empowerment in an attempt to encourage a more reflective approach.

Details

Employee Relations, vol. 20 no. 6
Type: Research Article
ISSN: 0142-5455

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