Hostname: page-component-78c5997874-t5tsf Total loading time: 0 Render date: 2024-11-15T06:58:35.219Z Has data issue: false hasContentIssue false
  • English
  • Français

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.
Get access Rights & Permissions [Opens in a new window]

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

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Banerjee, A. V. “A Simple Model of Herd Behavior.” Quarterly Journal of Economics, 107 (08 1992), 797–817.CrossRefGoogle Scholar
Bary, A. “Trading Points.” Barron's (04 6, 1992), 56.Google Scholar
Bary, A. “Trading Points.” Barron's (01 4, 1993), 41.Google Scholar
Bikhchandani, S.; Hirshleifer, D.; and Welch, I.. “A Theory of Fashion, Custom, and Cultural Change.” Journal of Political Economy, 100 (10 1992), 992–1026.CrossRefGoogle Scholar
Black, F. “Noise.” Journal of Finance, 41 (07 1986), 529–543.Google Scholar
Cornell, B. “The Money Supply Announcement Puzzle: Review and Interpretation.” American Economic Review, 73 (09 1983), 644–657.Google Scholar
De Long, J. B.; Shleifer, A.; Summers, L. H.; and Waldmann, R. J.. “Positive Feedback Strategies and Destabilizing Rational Speculation.” Journal of Finance, 45 (06 1990), 379–395.CrossRefGoogle Scholar
Epstein, G. “Blues for the Johnson Redbook.” Barron's (03 1, 1993), 51.Google Scholar
Foster, F. D., and Viswanathan, S.. “Strategic Trading with Asymmetrically Informed Traders and Long-Lived Information.” Journal of Financial and Quantitative Analysis, 29 (12 1994), 499–518.CrossRefGoogle Scholar
Friedman, M. “The Case for Flexible Exchange Rates.” In Essays in Positive Economics, Friedman, M. ed. Chicago, IL: Univ. of Chicago Press (1953).Google Scholar
Froot, K. A.; Scharfstein, D.; and Stein, J. C.. “Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation.” Journal of Finance, 47 (09 1992), 1461–1484.Google Scholar
Grinblatt, M.; Titman, S.; and Wermers, R.. “Momentum Investment Strategies, Portfolio Performance, and Herding: A Study of Mutual Fund Behavior.” Journal of Finance, 85 (12 1995), 1088–1105.Google Scholar
Grossman, S. J., and Stiglitz, J. E.. “Information and Competitive Price Systems.” American Economic Review, 66 (05 1976), 246–253.Google Scholar
Grossman, S. J., and Stiglitz, J. E.. “On the Impossibility of Informationally Efficient Markets.” American Economic Review, 70 (06 1980), 393–407.Google Scholar
Hirshleifer, D.; Subrahmanyam, A.; and Titman, S.. “Security Analysis and Trading Patterns when Some Investors Receive Information before Others.” Journal of Finance, 49 (12 1994), 1665–1698.CrossRefGoogle Scholar
Lakonishok, J.; Shleifer, A.; and Vishny, R. W.. “The Impact of Institutional Trading on Stock Prices.” Journal of Financial Economics, 32 (1992), 23–43.CrossRefGoogle Scholar
Lakonishok, J.; Shleifer, A.; Thaler, R.; and Vishny, R. W.. “Window Dressing by Pension Fund Managers.” American Economic Review, 81 (05 1991), 227–231.Google Scholar
Madrigal, V. “Non-Fundamental Speculation.” Journal of Finance, 51 (06 1996), 553–578.Google Scholar
McQueen, G., and Thorley, S.. “Bubbles, Stock Returns, and Duration Dependence.” Journal of Financial and Quantitative Analysis, 29 (09 1994), 379–401.CrossRefGoogle Scholar
Mitchell, C. “For Bond Traders, Johnson Redbook Has Caught Fire as Retail Indicator.” Wall Street Journal (07 10, 1992), A2.Google Scholar
Mitchell, C., and Donovan, K.. “Credit Markets.” Wall Street Journal (05 6, 1992), C9.Google Scholar
Trueman, B. “A Theory of Noise Trading in Securities Markets.” Journal of Finance, 43 (03 1988), 83–96.CrossRefGoogle Scholar