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Information about Herd Behavior

Herd behaviour describes how individuals in a group can act together without planned direction. The term pertains to the behaviour of animals in herds, flocks, and schools, and to human conduct during activities such as stock market bubbles and crashes, street demonstrations, sporting events, episodes of mob violence and even everyday decision making, judgement and opinion forming.

Herd behaviour in animals

A group of animals fleeing a predator shows the nature of herd behavior. In the often cited article "Geometry For The Selfish Herd," evolutionary biologist W. D. Hamilton said each individual group member reduces the danger to itself by moving as close as possible to the center of the fleeing group. Thus the herd appears to act as a unit in moving together, but its function emerges from the uncoordinated behavior of self-seeking individuals. [1]

Herd behaviour in human societies

Psychological and economic research has identified herd behavior in humans to explain the phenomena of large numbers of people acting in the same way at the same time. The British surgeon Wilfred Trotter popularized the "herd behavior" phrase in his book, Instincts of the Herd in Peace and War (1914). In The Theory of the Leisure Class, Thorstein Veblen explained economic behavior in terms of social influences such as "emulation," where some members of a group mimic other members of higher status. In "The Metropolis and Mental Life" (1903), early sociologist George Simmel referred to the "impulse to sociability in man," and sought to describe "the forms of association by which a mere sum of separate individuals are made into a 'society.'" Other social scientists explored behaviors related to herding, such as Freud (crowd psychology), Carl Jung (collective unconscious), and Gustave Le Bon (the popular mind). Swarm theory observed in non-human societies is a related concept and is being explored as it occurs in human society.

Stock market bubbles

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 herding behavior that is irrational and driven by emotion -- greed in the bubbles, fear in the crashes. Individual investors join the crowd of others in a rush to get in or out of the market. [2]

Some followers of the technical analysis school of investing see the herding behaviour of investors as an example of extreme market sentiment.[3] The academic study of behavioral finance has identified herding in the collective irrationality of investors, particularly the work of Robert Shiller[4], and Nobel laureates Vernon Smith, Amos Tversky, and Daniel Kahneman.

Behavior in crowds

Crowds that gather on behalf of a grievance can involve herding behavior that turns violent, particularly when confronted by an opposing ethnic or racial group. The New York Draft Riots and Tulsa Race Riot are notorious in U.S. history, but those episodes are dwarfed by the scale of violence and death during the Partition of India. Population exchanges between India and Pakistan brought millions of migrating Hindus and Muslims into close proximity; the ensuing violence produced an estimated death toll of between 200,000 and one million. The idea of a "group mind" or "mob behavior" was put forward by the French social psychologists Gabriel Tarde and Gustav Le Bon.

Sporting events can also produce violent episodes of herd behaviour. The most violent single riot in history may be the sixth-century Nika riots in Constantinople, precipitated by partisan factions attending the chariot races. The football hooliganism of the 1980s was a well-publicized, latter-day example of sports violence.

Religious and political affiliations

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Followers of certain religious cults and political movements have exhibited herd behaviour, often involving a cult of personality. The behavior may be deliberately coordinated to some degree, but each individual follows the group in ways that clearly place health or life in peril.In political movements, the dictators Adolf Hitler and Joseph Stalin relied heavily on a cult of personality.

Everyday decision-making

Benign herding behaviors may be frequent in everyday decisions, such as a person on the street deciding which of two restaurants to dine in. Suppose that both look appealing, but both are empty because it is early evening; so at random, this person chooses restaurant A. Soon a couple walks down the same street in search of a place to eat. They see that restaurant A has customers while B is empty, and choose A on the assumption that having customers makes it the better choice. And so on with other passersby into the evening, with restaurant A doing more business that night than B.[5]

Notes

1. ^ W. D. Hamilton, "Geometry For The Selfish Herd," Journal of Theoretical Biology, Volume 31, Issue 2, pp. 295-311.
2. ^ Markus K. Brunnermeier, Asset Pricing under Asymmetric Information: Bubbles, Crashes, Technical Analysis, and Herding, Oxford University Press (2001).
3. ^ Robert Prechter, The Wave Principle of Human Social Behavior, New Classics Library (1999), pp. 152-153.
4. ^ Robert J. Shiller, Irrational Exuberance, Princeton University Press (2000), pp. 149-153.
5. ^ Abhijit V. Banerjee, "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Vol. 107, No. 3, pp. 797-817.

See also

References

  • Wilfred Trotter, The Instincts of the Herd in Peace and War, 1914.
  • Brunnermeier, Markus Konrad. Asset Pricing under Asymmetric Information : Bubbles, Crashes, Technical Analysis, and Herding. Oxford, UK ; New York: Oxford University Press, 2001.
  • Rook, Laurens. "An Economic Psychological Approach to Herd Behavior." Journal of Economic Issues 40.1 (2006): 75-95.
  • Hamilton, W D. Geometry for the Selfish Herd. Diss. Imperial College, 1970.
  • Rook, Laurens. "An Economic Psychological Approach to Herd Behaviour." Journal of Economic Issues XL (2006): 75-95. Ebsco. Fall. Keyword: herd Behavior.
  • Stanford, Craig B. "Avoiding Predators: Expectations and Evidence in Primate Antipredator Behaviour." International Journal of Primatology 23 (2001): 741-757. Ebsco. Fall. Keyword: Herd Behaviour.
  • Ottavian, Marcco, and Peter Sorenson. Herd Behavior and Investment.

Further reading

Evolutionary biology is a sub-field of biology concerned with the origin and descent of species, as well as their change, multiplication, and diversity over time.
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William Donald Hamilton, F.R.S. (1 August 1936 — 7 March 2000) was a British evolutionary biologist, considered one of the greatest evolutionary theorists of the 20th century.
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Psychology (from Greek: Literally "talk about the soul" (from logos)) is both an academic and applied discipline involving the scientific study of mental processes and behavior.
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Economics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Greek for oikos (house) and nomos (custom or law), hence "rules of the house(hold).
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Wilfred Trotter (1872-1939) was a British surgeon, a pioneer in neurosurgery. He was also known for his studies on social psychology, most notably for his concept of the herd instinct, which he first outlined in two published papers in 1908, and later in his famous popular work
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Instincts of the Herd in Peace and War is the title of a famous book by Wilfred Trotter. Based on the ideas of Gustave LeBon it was very influential in the development of Group dynamics and Crowd psychology and the Propaganda of Edward Bernays.
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The Theory of the Leisure Class is a book, first published in 1899, by the American economist Thorstein Veblen while he was a professor at the University of Chicago.
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Thorstein Bunde Veblen (born Tosten Bunde Veblen July 30, 1857 – August 3, 1929) was a Norwegian-American sociologist and economist and a founder, along with John R. Commons, of the Institutional economics movement.
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Georg Simmel (March 1, 1858 – September 28, 1918, Berlin, Germany) was one of the first generation of German sociologists. His religious background was complicated but germane to his marginal status in German academia.
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Sigmund Freud

Born May 6 1856(1856--)
Freiberg, Moravia, now the Czech Republic
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Carl Gustav Jung

A recent edition of Jung's partially autobiographical work Memories, Dreams, Reflections.
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Gustave Le Bon (May 7, 1841 – December 13, 1931) was a French social psychologist, sociologist, and amateur physicist. He was the author of several works in which he expounded theories of national traits, racial superiority, herd behaviour and crowd psychology.
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Participants: Market maker
Exchanges: Stock exchange | List of stock exchanges | New York Stock Exchange | NASDAQ
colspan="4" align="left"| Toronto Stock Exchange | London Stock Exchange | Euronext | Frankfurt Stock Exchange
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The market sentiment is the intuitive feeling of the investment community regarding the expected movement of the stock market. For example, if market sentiment is bullish, then most investors expect an upward move in the stock market.
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Behavioral finance and behavioral economics are closely related fields which apply scientific research on human and social cognitive and emotional biases to better understand economic decisions and how they affect market prices, returns and the allocation of resources.
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Robert James "Bob" Shiller (born 1946) is an American economist, academic, and best-selling author. He has been a research associate of the National Bureau of Economic Research since 1980, was Vice President of the American Economic Association in 2005, and President of the Eastern
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Nobel can mean:
  • Nobel Prize, awarded annually since 1901, from the bequest of Swedish inventor Alfred Nobel
People:
  • Alfred Nobel, (1833-1896), the inventor of dynamite, instituted the Nobel Prizes

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Vernon Lomax Smith (born January 1, 1927 in Wichita, Kansas) is professor of economics at Chapman University School of Law and School of Business in Orange, California, a research scholar at George Mason University Interdisciplinary Center for Economic Science, and a Fellow of the
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Amos Tversky (March 16, 1937 - June 2, 1996) was a cognitive and mathematical psychologist, and a pioneer of cognitive science, a longtime collaborator of Daniel Kahneman, and a key figure in the discovery of systematic human cognitive bias and handling of risk.
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Daniel "Danny" Kahneman (born March 5, 1934 in Tel Aviv), is an Israeli-American psychologist and Nobel laureate, notable for his pioneering work on behavioral finance and hedonic psychology.
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New York Draft Riots (July 13 to July 16, 1863; known at the time as Draft Week[1]) were a series of violent disturbances in New York City that were the culmination of discontent with new laws passed by Congress to draft men to fight in the ongoing American Civil
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Tulsa Race Riot, also known as the 1921 Race Riot, The Night That Tulsa Died, the Tulsa Race War, or the Greenwood Riot, was a large-scale civil disorder confined mainly to the racially segregated Greenwood neighborhood of Tulsa, Oklahoma, USA in 1921.
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Partition of India is the process that led to the creation, on 14 August 1947 and 15 August 1947, respectively, of the sovereign states of Dominion of Pakistan (later Islamic Republic of Pakistan) and Union of India (later Republic of India) upon the granting of independence from
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Motto
Liberté, Égalité, Fraternité
"Liberty, Equality, Fraternity"
Anthem
"La Marseillaise"


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Gabriel Tarde (March 12, 1843 in Sarlat, France – May 13, 1904 in Paris) French sociologist, criminologist and social psychologist who conceived sociology as based on small psychological interactions among individuals (much as if it were chemistry), the fundamental
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Gustave Le Bon (May 7, 1841 – December 13, 1931) was a French social psychologist, sociologist, and amateur physicist. He was the author of several works in which he expounded theories of national traits, racial superiority, herd behaviour and crowd psychology.
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The Nika riots (Greek: Στάση του Νίκα), or Nika revolt, took place over the course of a week in Constantinople in 532.
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Constantinople (Greek: Κωνσταντινούπολις, Konstantinoúpolis, or Πόλις, Polis
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Football hooliganism (sometimes described as the English Disease) is hooliganism by football club supporters.[1] Fights between supporters of rival teams sometimes take place immediately before or after football matches; often at pre-arranged locations away from
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Places:
  • Cults, Aberdeenshire, a suburb of Aberdeen, where Cults Academy is situated.
  • Cult, Haute-Saône, France
Cult, in its original sense, refers to:

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