Search results

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

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

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.

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

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.

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.

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.

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.

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.

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.

The purpose of this paper is to provide a review of theory and empirical evidence on herding behavior in financial markets.

Review and discussion of the literature.

More than two decades of empirical and theoretical research have provided a significant insight on investor herding behavior.

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.

The paper may need empirical methodologies to evaluate herding that address current limitations.

The paper reviews recent empirical evidence and identifies open issues for future research.

This study is concerned with markets operating in Turkey in the Istanbul Stock Exchange (BIST), which have been observed and studied in relation to herd behavior. During the research part of the study, the existence of herd behavior was investigated with the help of the daily closing price data of the firms in BIST between January 2011 and December 2017. In the research section of the study, the authors used regression analysis. In the analysis, the authors used the index value of the BIST whole Index. The average value of the index value of BIST whole Index was taken. Then, according to this average, 1% percentile and 5% percentile were taken. In the periods in the 1% percentile (at the dates) the result was that herd behavior was present. The herd behavior was observed for the periods (for dates) included in the percentile of 1%. On the other hand, the results of the analysis for the 5% percentile show that the herd behavior is only seen in the upper extremes.

The purpose of this paper, and a companion paper (Duxbury, 2015), is to review the insights provided by experimental studies examining financial decisions and market behavior.

Focus is directed on those studies examining explicitly, or with direct implications for, the most robustly identified phenomena or stylized facts observed in behavioral finance. The themes for this first paper are theory and financial markets.

Experiments complement the findings from empirical studies in behavioral finance by avoiding some of the limitations or assumptions implicit in such studies.

The authors synthesize the valuable contribution made by experimental studies in extending the knowledge of the functioning of financial markets and the financial behavior of individuals.

We introduce the idea that informational cascades can explain the observed regularity that emigrants from the same location tend to choose the same foreign location. Thus, informational cascades generate herd behavior. Herd behavior is compared with the network-externalities explanation of the same phenomenon of migration clustering.

This analysis investigates the micro-dynamics of organizational decision-making by exploring connections between institutional theory, on the one hand, and both social psychological research on conformity and recent work in economics on herd behavior and information cascades, on the other hand. The authors draw attention to the differences between normative and informational conformity as distinct motivational drivers of adoption behaviors by exploring their differential effects on the post-adoption outcomes of decoupling (e.g., Westphal & Zajac, 1994), customization (e.g., Fiss, Kennedy, & Davis, 2012), and abandonment (e.g., Ahmadjian & Robinson, 2001). The authors conclude that normative conformity leads to certain post-adoption outcomes while informational conformity is associated with others.

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.

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.

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.

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.

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.

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

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.

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

The purpose of this paper is to investigate the changes in initial public offering (IPO) underpricing and short‐run performance following a regulatory reform (No. 54 [2002] China Securities Regulatory Commission (CSRC)) of the method of allocating IPO shares in China.

On 20 May 2002, the CSRC announced that IPO subscription and allotment would be based on the market value of investors' tradable shareholdings. Before the regulatory change, this was determined by the amount of funds used for subscription. The reform was intended to increase participation by both smaller and institutional investors. Based on a sample of 209 IPOs in the Shanghai A‐share market during the period 2001‐2003, the paper employs an event study methodology to examine the impact of this IPO regulatory reform.

The paper finds that the overall (pre‐ and post‐reform) average abnormal initial return of 116.94 per cent is lower than in earlier studies of Chinese IPOs but higher than in other markets. Post‐reform underpricing decreases by 42.27 per cent compared to pre‐reform levels. In the post‐listing aftermarket a pre‐reform upward trend of cumulative abnormal returns was reversed to become downward post‐reform. The results suggest that the regulatory change has encouraged well‐informed investors, consistent with Information Cascades and Bandwagon hypotheses. It also appears that the reform improved market efficiency and secondary market liquidity.

The findings shed light on the relationship between IPO costs, IPO pricing, market liquidity and market microstructure. They also have important implications for issuers, underwriters and in particular for policy markers.