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Social Influence in Stockmarkets: A Conceptual Analysis of Social Influence Processes in Stock Markets

Author

Listed:
  • Biel, Anders

    (Department of Psychology, University of Gothenburg, Gothenburg, Sweden)

  • Andersson, Maria

    (Department of Psychology, University of Gothenburg, Gothenburg, Sweden)

  • Hedesström, Martin

    (Department of Psychology, University of Gothenburg, Gothenburg, Sweden)

  • Jansson, Magnus

    (Department of Psychology, University of Gothenburg, Gothenburg, Sweden)

  • Sundblad, Eva-Lotta

    (Department of Psychology, University of Gothenburg, Gothenburg, Sweden)

  • Gärling, Tommy

    (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.

Suggested Citation

  • Biel, Anders & Andersson, Maria & Hedesström, Martin & Jansson, Magnus & Sundblad, Eva-Lotta & Gärling, Tommy, 2010. "Social Influence in Stockmarkets: A Conceptual Analysis of Social Influence Processes in Stock Markets," Sustainable Investment and Corporate Governance Working Papers 2010/13, Sustainable Investment Research Platform.
    • Handle: RePEc:hhb:sicgwp:2010_013
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    Keywords

    Social influence; stock investments; conceptual analysis;
    All these keywords.

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