Economics Herd Behavior Questions
Herd behavior influences investment decisions by causing individuals to follow the actions and decisions of the majority, rather than making independent judgments based on their own analysis and information. This can lead to a "herd mentality" where investors tend to buy or sell assets based on the actions of others, rather than on fundamental factors such as market fundamentals or individual risk preferences. As a result, herd behavior can lead to market inefficiencies, increased volatility, and the formation of speculative bubbles.