- Provided that the herd constitutes a majority, investors have a tendency to follow it without reflecting over their decisions. It can have devastating consequences, says the researcher Maria Andersson in a new thesis at the University of Gothenburg.
- It is therefore important to understand which psychological mechanisms induce people to behave in the same way as everyone else, says Maria Andersson, who has studied why herding occurs in her doctoral thesis in psychology.The stock market contains various kinds of information that can provide guidance as to the future yield of shares. An important question is which information and analyses investors use when they make investment decisions.
- A common strategy is to observe what others do and follow the herd, says Maria Andersson.
Influenced by a herd
The thesis presents four experimental studies that illustrate herding in the stock market. Some 450 people took part in the investigations. The primary aim was to establish whether investors are influenced by a herd when they make investment decisions, and if that is the case whether it matters if the herd constitutes a majority or a minority. The size of the herd and the reliability of its judgements varied in the different studies.
In brief, the results show that there is a strong tendency to put trust in the majority being right and to disregard minorities. This result applies irrespective of whether the majority has performed well or not. Minorities on the other hand have no influence even if their point of view is correct.Is there any way to avoid being drawn along with the herd?
- This can be achieved by raising the participants' awareness of how reliable the information is, says Maria Andersson.
Better and clearer information would probably also increase the chance of investors disregarding the herd. Being aware that the information available concerning the stock exchange is not always reliable and critically examining what the herd is doing is consequently a good starting point for successful share dealing.Title of the thesis: Social influence in stock markets.
Europe's microtechnology industry is attuned to growth
10.03.2017 | IVAM Fachverband für Mikrotechnik
Preferential trade agreements enhance global trade at the expense of its resilience
17.02.2017 | International Institute for Applied Systems Analysis (IIASA)
Astronomers from Bonn and Tautenburg in Thuringia (Germany) used the 100-m radio telescope at Effelsberg to observe several galaxy clusters. At the edges of these large accumulations of dark matter, stellar systems (galaxies), hot gas, and charged particles, they found magnetic fields that are exceptionally ordered over distances of many million light years. This makes them the most extended magnetic fields in the universe known so far.
The results will be published on March 22 in the journal „Astronomy & Astrophysics“.
Galaxy clusters are the largest gravitationally bound structures in the universe. With a typical extent of about 10 million light years, i.e. 100 times the...
Researchers at the Goethe University Frankfurt, together with partners from the University of Tübingen in Germany and Queen Mary University as well as Francis Crick Institute from London (UK) have developed a novel technology to decipher the secret ubiquitin code.
Ubiquitin is a small protein that can be linked to other cellular proteins, thereby controlling and modulating their functions. The attachment occurs in many...
In the eternal search for next generation high-efficiency solar cells and LEDs, scientists at Los Alamos National Laboratory and their partners are creating...
Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are less stable. Now researchers at the Technical University of Munich (TUM) have, for the first time ever, produced a composite material combining silicon nanosheets and a polymer that is both UV-resistant and easy to process. This brings the scientists a significant step closer to industrial applications like flexible displays and photosensors.
Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are...
Enzymes behave differently in a test tube compared with the molecular scrum of a living cell. Chemists from the University of Basel have now been able to simulate these confined natural conditions in artificial vesicles for the first time. As reported in the academic journal Small, the results are offering better insight into the development of nanoreactors and artificial organelles.
Enzymes behave differently in a test tube compared with the molecular scrum of a living cell. Chemists from the University of Basel have now been able to...
20.03.2017 | Event News
14.03.2017 | Event News
07.03.2017 | Event News
24.03.2017 | Materials Sciences
24.03.2017 | Physics and Astronomy
24.03.2017 | Physics and Astronomy