Herd Instinct

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Herd Instinct

A sociological phenomenon in which everyone does what everyone else seems to be doing. In investing, the herd instinct is seen most commonly in panic sells and rallies that occur without regard for broader indicators. That is, regardless of the sustainability of a rally or the overreaction of the sell-off, the concept of a herd instinct suggests that traders will continue to follow the trend until contrary evidence becomes overwhelming (or simply until they calm down). See also: Behavioral economics, Crowd.
References in periodicals archive ?
An examination of herd behavior in four mediterranean stock markets.
Herd behavior in financial markets: A review (2000)
We critically examine the idea that borrowing creates systemic externalities that give rise to herd behavior, catching the economy in a trap of multiple equilibria from which it can escape only with the help of a countercyclical prudential policy.
Irrational conformity or herd behavior is the behavior the subject presents when they are guided by intuitionistic and instinctive activities and influenced by the behavior or attitude of the object (Figure 1).
Zemsky, 1998, "Multidimensional Uncertainty and Herd Behavior in Financial Markets", American Economic Review, 88, 4, September, 724-748.
Given the lengthy history of financial bubbles, market failures, and mass manias, it is apparent that the financial sector is quite susceptible to herd behavior and emotion--factors that Depression-era economist John Maynard Keynes famously termed "animal spirits.
Ethical lapses, failures of understanding, herd behavior, self-deception--all contributed to the financial crisis.
Those with no training-the vast majority of civilians panic and fall into herd behavior.
Yes, this exemplifies herd behavior based on incomplete information--collective movement.
Herd behavior arises, Keynes thought, not from attempts to deceive, but from the fact that, in the face of the unknown, we seek safety in numbers.
Comprised of a recent video, inkjet prints, and sculpture, the show describes how this Borg-like amalgam defines us, how there's nothing natural about the natural world, and how nature, like nudity, is largely the product of herd behavior.