Central bank communication key to herding behaviour, BoJ paper finds
Central bank communications have a powerful effect on herding behaviour by nervous investors, a working paper published today by the Bank of Japan (BoJ) has shown.
In Confidence erosion and herding behavior in bond markets, authors Koichiro Kamada and Ko Miura develop an existing model of private information in markets into a ‘two layer' model that includes public information as published by the central bank. Their approach seeks to explain the leap in interest rate volatility caused by the BoJ
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