TY  - JOUR
AU  - Froot,Kenneth A.
AU  - Scharfstein,David S.
AU  - Stein,Jeremy C.
TI  - Herd on the Street:  Informational Inefficiencies in a Market with      Short-Term Speculation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3250
PY  - 1990
Y2  - February 1990
UR  - http://www.nber.org/papers/w3250
L1  - http://www.nber.org/papers/w3250.pdf
N1  - Author contact info:
Kenneth A. Froot
Graduate School of Business
Harvard University
Soldiers Field
Boston, MA 02163
Tel: 617/495-6677
Fax: 617/496-7357
E-Mail: kfroot@hbs.edu

David S. Scharfstein
Harvard Business School
Baker 239
Soldiers Field
Boston, MA 02163
Tel: 617/496-5067
Fax: 617/496-8443
E-Mail: dscharfstein@hbs.edu

Jeremy C. Stein
Federal Reserve Board of Governors
20th Street and Constitution Ave., N.W.
Washington, DC 20551
E-Mail: jeremy.c.stein@frb.gov
AB  - Standard models of informed speculation suggest that traders try to learn information that others do not have. This result implicitly relies on the assumption that speculators have long horizons, i.e, can hold the asset forever. By contrast, we show that if speculators have short horizons, they may herd on the same information, trying to learn what other informed traders also know. There can be multiple herding equilibria, and herding speculators may even choose to study information that is completely unrelated to fundamentals. These equilibria are informationally inefficient.
ER  -