Herd Behavior in Venture Capital Market: Evidence from China

Zhang, Ruijun; Yang, Xiaotong; Li, Nian; Khan, Muhammad Asif

doi:10.3390/math9131509

Cited by 13 publications

(6 citation statements)

References 61 publications

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“…Behavioral development economics is built on the premise that "in many cases, individuals make pretty bad decisions-decisions they would not have made if they had paid full attention and possessed complete information, unlimited cognitive abilities, and complete self-control" [2]. Cognitive biases can perversely influence how the poor face self-control problems, such as financial decisions and political processes [46][47][48]. The behavioral development literature points to accepting these problems as given and challenging to eliminate, arguing that steering the poor is an effective and ethical strategy for political decision-makers [49,50].…”

Section: The Nudge Theory: the Behavioral Development Economics Approachmentioning

confidence: 99%

Principles of Nudging and Boosting: Steering or Empowering Decision-Making for Behavioral Development Economics

Espinosa

Wang²,

Soto

2022

Sustainability

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Behavioral development economics promotes the nudge theory as a mechanism to incorporate people’s cognitive biases, steering their behavior in the desired direction through coercive state intervention. Cognitive biases become a reason to doubt the efficiency of decision-making psychology in the free market process. A fundamental assumption of this approach is that political decision-makers know the people’s means and ends in ways that protect them from cognitive biases. This article reviews and discusses the nudge theory, based on the boost theory developed by the Austrian School of Economics. The boost theory consists of a comparative institutional perspective to provide the empowerment people need to realize their errors and correct them “on the fly” to cultivate economic development. It is argued that the nudge theory overlooks the cognitive biases of political decision-makers, neglects the comparative perspective of the institutional environment in the face of such biases, and does not consider how construction of on-the-fly judgments works. After reviewing the principles of the nudge theory, its main criticisms from the boost theory are discussed, forming novel conclusions about and research avenues on behavioral development economics, according to the steering or empowering quality of the institutional environment.

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Section: The Nudge Theory: the Behavioral Development Economics Approachmentioning

confidence: 99%

Principles of Nudging and Boosting: Steering or Empowering Decision-Making for Behavioral Development Economics

Espinosa

Wang²,

Soto

2022

Sustainability

View full text Add to dashboard Cite

show abstract

“…For industries with a high dependence on foreign financing, a high technical intensity, and areas with better property rights protection, venture capital has a more significant role in promoting innovation performance [29]. Zhang et al (2021) used regression to examine the causes and consequences of herding among venture capitalists. The results showed that herd behavior in the venture capi-tal market was driven by positive signals of basic information and a higher degree of information uncertainty [30].…”

Section: Definition Of Research Variablesmentioning

confidence: 99%

“…Zhang et al (2021) used regression to examine the causes and consequences of herding among venture capitalists. The results showed that herd behavior in the venture capi-tal market was driven by positive signals of basic information and a higher degree of information uncertainty [30]. The final calculation method is as follows:…”

Section: Definition Of Research Variablesmentioning

confidence: 99%

The Internal Connection Analysis of Information Sharing and Investment Performance in the Venture Capital Network Community

Feng

Sun

Zhong

et al. 2021

IJERPH

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In order to explore the internal connection between information sharing and investment performance in the venture capital network community, this study took environmental-governance start-ups as the research object and used the 2009–2020 environmental-social enterprise start-up venture capital investment events as a data sample. The successful exit rate of the venture capital portfolio and the successful listing rate of investment ventures were used as the measurement criteria. Combined with regression analysis, the relationship between information sharing and investment performance in the venture capital network community was analyzed in detail. Research shows that there are differences between the ways of information sharing in the venture capital network communities. In the regression results, all coefficients are less than 0.01. There is a positive correlation between information sharing and investment performance in the venture capital network community. With the increase in enterprise characteristic variables, the degree of enterprise risk information sharing is getting higher and higher. This ultimately leads to more and more frequent corporate investment performance and a higher possibility of acquisition. Among them, the degree of information sharing in the venture capital network community is relatively high, and venture capital companies that are supported by corporate venture capital institutions will benefit even more from listed capital. Not only was the analysis of the relationship between finance and investment in the venture capital network community pointed out in this research, but also the investment development of entrepreneurial enterprises was also provided with feasible suggestions.

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“…Herding is a form of social behavior that involves 'the alignment of the thoughts or behaviours of individuals in a group (herd) through local interaction and without centralized coordination' [1, p 20]. Several mechanisms were proposed for explaining this behavior, such as the existence of a positive feedback loop [2] that explains herding in contexts ranging from crime [2] to financial markets [3,4]. Another mechanism explaining herd behavior is the spread of information in a network [5].…”

Section: Introductionmentioning

confidence: 99%

Unveiling herd behavior in financial markets

Neuman,

Cohen

2023

J. Stat. Mech.

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Herd behavior is a powerful source of growth in financial markets. However, as available energy resources limit exponential growth, we should expect periods where an upward trend is balanced toward equilibrium or reverse its direction toward decline. This paper proposes a novel approach for modeling herd behavior and predicting a trend reversal in financial markets. Our approach relies on two key metrics: asymmetry and ‘steps to symmetry.’ We use Machine Learning to identify hidden patterns in the fluctuations of these metrics and use the patterns for predicting a transition from exponential growth. Analyzing three datasets of stock prices, we present solid empirical evidence supporting the proposed approach.

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Herd Behavior in Venture Capital Market: Evidence from China

Cited by 13 publications

References 61 publications

Principles of Nudging and Boosting: Steering or Empowering Decision-Making for Behavioral Development Economics

Principles of Nudging and Boosting: Steering or Empowering Decision-Making for Behavioral Development Economics

The Internal Connection Analysis of Information Sharing and Investment Performance in the Venture Capital Network Community

Unveiling herd behavior in financial markets

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