The herd instinct

The herd instinct. People tend to imitate others. Investors may fear that others know more or have more information and will tend to do what others are doing.

Behaviour finance has also found that investors tend to rely on judgments derived from small samples of data or single sources. For example, investors are often overconfident in their judgments and tend to go for the single "telling" detail instead of the obvious range.

Behavioural finance is a subfield of behavioural economics. It argues that when people make financial decisions like investing, they are not nearly as rational as traditional finance theory predicts.

Mainstream theory make assumptions in its models that people are rational and free from emo...