Herd behavior : When an investor or group of investors act in a way that deviates from the majority's decision, this phenomenon is known as herd behavior. Th...
Herd behavior: When an investor or group of investors act in a way that deviates from the majority's decision, this phenomenon is known as herd behavior. This behavior can lead to an increase or decrease in the stock price, depending on whether the majority is right or wrong.
Social contagion: When an investor or group of investors' actions cause an emotional or psychological response from other investors, this process is called social contagion. This can happen when investors follow the actions of those around them, regardless of their own judgment.
Examples:
Herd behavior: In 2018, during the peak of the cryptocurrency market, a surge in retail investors following news and social media rumors led to a significant increase in the price of Bitcoin.
Social contagion: During the 2008 financial crisis, many investors panicked and sold their stocks, leading to a sharp decline in the market price. However, when the crisis ended, many of these investors were unable to regain their initial investment and faced significant losses