Herding Behavior in Household Investment Decisions: Evidence from the German SOEP Panel

This thesis examines financial herding among German households, with a focus on differences between crisis and post-crisis periods. Using data from the German Socio-Economic Panel (SOEP), a regional measure of herding is constructed by comparing individual investment decisions with the average behavior observed within each region, based on standardized thresholds. To identify the profiles of households more prone to herding, Ordinary Least Squares (OLS) regressions are estimated including socio-demographic and economic variables, as well as behavioral covariates such as risk aversion, personality traits (Big Five), and locus of control. The results indicate that herding is significantly more prevalent during financial crises, suggesting that macroeconomic uncertainty amplifies individuals’ tendency to align with collective behavior. Moreover, psychological characteristics prove to be important determinants of herding propensity. Overall, the study highlights the relevance of both individual and contextual factors in shaping financial decision-making, providing insights for systemic risk assessment and financial education.