Herding

Herding refers to the tendency of individuals to follow the actions or opinions of a larger group, rather than making independent decisions. This behavior often occurs in situations involving uncertainty, where people look to others for guidance, leading to a strengthening of the group's collective behavior. For example, investors may buy or sell stocks based on what others are doing, sometimes causing market trends that do not reflect underlying fundamentals. Herding can contribute to bubbles or crashes in markets, as it emphasizes conformity over individual analysis, impacting overall decision-making and stability.