Herding behavior can drive market trends from "summary" of Beyond Greed and Fear:Understanding Behavioral Finance and the Psychology of Investing by Hersh Shefrin
In the world of investing, it is often observed that market trends can be heavily influenced by herding behavior. This phenomenon occurs when individuals follow the actions of the majority, rather than making decisions based on their own independent analysis. This behavior can lead to the amplification of market movements, causing prices to rise or fall rapidly as a result of group dynamics rather than fundamental factors. Herding behavior is driven by a variety of psychological factors that influence how individuals perceive and react to information. One such factor is the fear of missing out, or FOMO, which can cause investors to abandon their own judgment in favor of following the crowd. In this way, herding behavior can create a self-reinforcing cycle where individuals continue to follow the trend, even if it is not based on r...
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