The Geneva Risk and Insurance Review

, Volume 31, Issue 1, pp 35–42 | Cite as

A note on risk aversion and herd behavior in financial markets

  • Jean-Paul Decamps
  • Stefano Lovo
Original Paper


We show that differences in market participants risk aversion can generate herd behavior in stock markets where assets are traded sequentially. This in turn prevents learning of market's fundamentals. These results are obtained without introducing multidimensional uncertainty or transaction cost.


Herd behavior Risk aversion 

JEL Classifications

G1 G14 C11 D82 

Copyright information

© The Geneva Association 2006

Authors and Affiliations

  • Jean-Paul Decamps
    • 1
    • 2
  • Stefano Lovo
    • 3
  1. 1.GREMAQ-IDEI Université de Toulouse 1ToulouseFrance
  2. 2.Europlace Institute of FinanceFrance
  3. 3.Finance and Economics DepartmentHECJouy en JosasFrance

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