Vicarious Learning Blog

Informational Cascades

In financial economics and risk assessment, the role of assessing or reducing uncertainty in decision making is crucial. As such, the role of conversation, hearsay and gossip in influencing such assessments can be crucial. A great study was carried out by Henry Cao & David Hirshleifer in 2000 called Conversation, Observational Learning and Informational Cascades (PDF). This looks at how and why groups of people often 'herd' in on poor decisions. In particular they look at how people's observations of others behaviour results in these informational cascades or herding. n.b. To make best use of these paper you should feel comfortable with probability modeling and be mathematically adept. None the less, there are many interesting references from which you could otherwise benefit.

Posted at 04:43PM Jun 24, 2008 by Finbar Dineen in General  |  Comments[0]