Would you have swooned for the herd behavior of “tulip mania” in the 17th century?
Large stock market trends often begin and end with periods of frenzied buying (bubbles) or selling (crashes).
Many observers cite these episodes as clear examples of herd behavior that is irrational and driven by emotion and greed in the bubbles, fear in the crashes.
Individual investors tend to join the crowd of others in a rush to get in or out of the market. The academic study of behavioral finance has identified this collective irrationality of investors as herd behavior.
This short and fun video explores how the concept of “herding” influences the way people invest, then and now.