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【Academic Seminar】Shepherding the Herd

  • 2019.3.12
  • Event
Shepherding the Herd

Topic: Shepherding the Herd

Speaker: Jussi Keppo, NUS Business School

Date and Time: 2:00 pm – 3:00 pm, March 12, 2019

Venue: Boardroom, Dao Yuan Building




This article analyzes multiple experts who forecast an underlying dynamic state based on a stream of public and private signals. Each expert forecaster minimizes a convex combination of her forecasting error and deviation from the other experts' forecasts. As a result, the experts exhibit herding behavior -- a bias that has been well-recognized in the economics and psychology literature. Our first contribution derives and analyzes the experts' optimal forecast under different levels of herding. This extends the Kalman filter to applications where herding is an important part of the process. Our second contribution is a welfare analysis where we show that, on average, the precision of public information affects welfare more than the level of herding among the experts. However, on average, the level of herding decreases the heterogeneity in the experts' forecasts more than the precision of public information. Our third contribution is an estimation scheme for our model and a resulting simple compensation scheme that minimizes the herding effect.








Associate Professor Jussi Keppo teaches risk management and analytics courses, and directs analytics executive education programs at NUS Business School. He is also Co-Director of NUS Business Analytics Center. Previously, he taught at the University of Michigan.


He has several publications in the top-tier journals such as Journal of Economic Theory, Review of Economic Studies, Management Science, Operations Research, and Journal of Business on topics such as investment analysis, banking regulation, learning, and strategic incentives. His research has been featured also in numerous business and popular publications, including the Wall Street Journal and Fortune.


Professor Keppo’s research has been supported by several Asian, European, and US agencies such as the National Science Foundation. He serves on the editorial boards of Management Science, Mathematics of Operations Research, Journal of Risk, Production and Operations Management, and Journal of Energy Markets. He has consulted several startups, Fortune 100 companies, and financial institutions.