NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Survey Evidence on Diffusion of Investment Among Institutional Investors

Robert J. Shiller, John Pound

NBER Working Paper No. 1851
Issued in March 1986
NBER Program(s):   ME

Contagion or epidemic models of financial markets are proposed in which interest in or attention to individual stocks is spread by word of mouth. The models give alternative interpretations of the random walk character of stock prices. A questionnaire survey of institutional investors was undertaken to ascertain the relevance of such models. Questions elicited what fraction of these investors were unsystematic and allowed themselves to be influenced by word-of-mouth communications or other salient stimuli. Rough indications of the infection rate and removal rate were produced. Investors in stocks whose price had recently increased dramatically to a high P/E ratio were contrasted with a control group of investors.

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Document Object Identifier (DOI): 10.3386/w1851

Published: Journal of Economic Behavior and Organization vol. 12, p. 47-66 1989

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