Scandinavian Working Papers in Business Administration
Sustainable Investment and Corporate Governance Working Papers,
Sustainable Investment Research Platform
No 2010/13: Social Influence in Stockmarkets: A Conceptual Analysis of Social Influence Processes in Stock Markets
Anders Biel (), Maria Andersson, Martin Hedesström, Magnus Jansson, Eva-Lotta Sundblad and Tommy Gärling
Additional contact information
Anders Biel: Department of Psychology, University of Gothenburg, Gothenburg, Sweden
Maria Andersson: Department of Psychology, University of Gothenburg, Gothenburg, Sweden
Martin Hedesström: Department of Psychology, University of Gothenburg, Gothenburg, Sweden
Magnus Jansson: Department of Psychology, University of Gothenburg, Gothenburg, Sweden
Eva-Lotta Sundblad: Department of Psychology, University of Gothenburg, Gothenburg, Sweden
Tommy Gärling: Department of Psychology, University of Gothenburg, Gothenburg, Sweden
Abstract: This paper focuses on the role of social factors for booms-bubbles-busts cycles in stock markets. It is argued that indirect and direct social influences are important contributors by reinforcing stock investors’ cognitive biases exaggerated by affective influences. A review of herding research primarily undertaken by financial economists is followed by a demonstration that psychological theories of direct social influence (imitation) have bearings on the understanding of the herding phenomenon in stock markets. How to continue this research with relevance for regulations of stock markets is discussed.
Keywords: Social influence; stock investments; conceptual analysis
15 pages, July 1, 2010
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