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Herding on Noise: The Case of Johnson Redbook's Weekly Retail Sales Data

Published online by Cambridge University Press:  06 April 2009

Joseph Golec
Joseph Golec
Affiliation:
Graduate School of Management, Clark University, 950 Main Street, Worcester, MA 01610.
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Abstract

Recent models of herding suggest that speculators may rationally trade on information unrelated to fundamentals when their trading horizons are short. This study provides an empirical example where this appears to be the case. Johnson Redbook's weekly retail sales figures predicted bond returns for a short time after a significant number of bond traders began purchasing and trading on the data. The significant relationship between the data and bond returns disappeared just after the Wall Street Journal started to report it. Meanwhile, there was little or no change in the relationship between the data and retailers' stock returns, perhaps because the data have long been followed by retail stock analysts, Johnson Redbook's original investor clientele.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 32 , Issue 3 , September 1997 , pp. 367 - 381
Copyright
Copyright © School of Business Administration, University of Washington 1997

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