Question

What is the definition of herding and how does it contribute to bubbles?

What is the definition of herding and how does it contribute to bubbles?

Homework Answers

Answer #1

Herding means when one follows others or the crowd , so everyone goes in the same direction,. While this applying to equities and other asset classes, when there is buying interest in a asset, its value goes up which attracts interest of others even though valuations are higher, so current demand encourage more demand which results in continuous rise in price levels to very high point from where there is no upside left but there is huge downside risk. So this way herding contribute to bubbles.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
How does herding cause the efficient markets hypothesis to not work?
How does herding cause the efficient markets hypothesis to not work?
What influences an individual's definition of health? How does lifespan development influence an individual's definition of...
What influences an individual's definition of health? How does lifespan development influence an individual's definition of health?
What is natural organic matter and how does it contribute to the negative charge of the...
What is natural organic matter and how does it contribute to the negative charge of the solid phase
How does the media contribute to racism?
How does the media contribute to racism?
Explain what herding, leverage, and extrapolative expectations are and how they can lead to a bubble....
Explain what herding, leverage, and extrapolative expectations are and how they can lead to a bubble. Also explain why extrapolative expectations are essential for the formation of a bubble and how leverage can cause the bursting of a bubble to be worse than it otherwise would be. Explain in a short paragraph.
If gas bubbles are produced by a chemical reaction, how could you prove that the bubbles...
If gas bubbles are produced by a chemical reaction, how could you prove that the bubbles were composed of carbon dioxide
What is mast cell sensitization and how does it contribute to Type I hypersensitivity reactions?
What is mast cell sensitization and how does it contribute to Type I hypersensitivity reactions?
define public administration in your own words. Explain what informed your definition. How does your definition...
define public administration in your own words. Explain what informed your definition. How does your definition compare to other definitions you have come across?
How does the molecular structure differ between glycogen and cellulose? How does their structure contribute to...
How does the molecular structure differ between glycogen and cellulose? How does their structure contribute to their function?
How does gender identity contribute to sexual expression?
How does gender identity contribute to sexual expression?