The effects of uncertainty of available information on investorsʹʹ behaviors on herding formation

During the past century, there were different events where herding behavior created market turbulence and many investors were hurt, significantly. In this paper, we perform a survey to investigate investors’ behavior on creating herding behavior when they face with various levels of uncertainty on available information on the market. The survey designs a questionnaire, distributes it among some investors, and analyzes the results. The findings of our survey indicate that when there is a high level of uncertainty on publicly disclosed information, most investors assign more weights on confidential information or make no decision. In the event the uncertainty is on moderate level, investors rely more on publicly announced news and follow others’ behaviors. Finally, when the level of uncertainty is low, most investors depend on public information but this uncertainty creates less herding behavior compared with the previous case. The study also indicates that those investors who are normally making their decision with high inertia are not influenced by herding behavior.