Herding in Equity Crowdfunding

Astebro, Thomas B., Fernandez Sierra, Manuel, Lovo, Stefano and Vulkan, Nir (2017) Herding in Equity Crowdfunding. HEC Paris Research Paper.


Do equity crowdfunding investors herd? We build a model where informed and uninformed investors arrive sequentially and choose whether and how much to invest. We test the model using data of investments on a leading European equity crowdfunding platform. We show theoretically and find empirically that the size and likelihood of a pledge is affected positively by the size of the most recent pledges, and negatively by the time elapsed since the most recent pledge. The empirical analysis is inconsistent with naïve herding, independent investments, or exogenously correlated investments. Investors rationally herd but social learning about the project's quality stops only when herding induce investors not to invest.

Item Type: Other Working Paper
Keywords: equity crowdfunding, herding, finance
Subject(s): Finance
Date Deposited: 27 Mar 2018 09:38
Last Modified: 14 Jun 2018 11:47
URI: http://eureka.sbs.ox.ac.uk/id/eprint/6799

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