Behavioural Finance

Herding

Definition

What is Herding?

Following the actions of a group rather than making an independent assessment.

Example in practice

Investors buy an asset mainly because everyone else appears to be buying.

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The tendency to feel losses more strongly than equivalent gains.

The tendency to overestimate one's knowledge, forecasting ability, or control.

The tendency to seek or interpret information that supports an existing belief.

Incorporating environmental, social, and governance factors into investment analysis or ownership.

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