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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. A stock market bubble is a type of Economic bubble taking place in Stock markets when price of Stocks rise and become overvalued by any measure of Stock

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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. Evolutionary biology is a sub-field of Biology concerned with the origin of Species from a Common descent, and Descent of species William Donald Hamilton, FRS ( 1 August 1936 &mdash 7 March 2000) was a British Evolutionary biologist 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]

Symmetry breaking in herding behavior

Asymmetric aggregation of animals under panic conditions has been observed in many species, including humans, mice, and ants. Theoretical models have demonstrated symmetry breaking similar to observations in empirical studies. For example when panicked individuals confined to a room with two equal and equidistant exits, a majority will favor one exit while the minority will favor the other.

Possible mechanisms:

- Hamilton’s Selfish Herd Theory

- Byproduct of communication skill of social animal or runaway positive feedback

- Neighbor copying

Escape Panic Characteristics

- Individuals attempt to move faster than normal

- Interactions between individuals become physical

- Exits become arched and clogged

- Escape is slowed by fallen individuals serving as obstacles

- Individuals display a tendency towards mass or copied behavior

- Alternative or less used exits are overlooked[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. Psychology (from Greek grc ψῡχή psȳkhē, "breath life soul" and grc -λογία -logia) is an Academic and Economics is the social science that studies the production distribution, and consumption of goods and services. The British surgeon Wilfred Trotter popularized the "herd behavior" phrase in his book, Instincts of the Herd in Peace and War (1914). Wilfred Trotter (1872-1939 was a British Surgeon, a pioneer in Neurosurgery. Instincts of the Herd in Peace and War is the title of a famous book by Wilfred Trotter. 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. 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 Thorstein Bunde Veblen (born Tosten Bunde Veblen July 30, 1857 &ndash August 3, 1929) was a Norwegian-American sociologist 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' ". Georg Simmel (March 1 1858 &ndash September 28 1918 was one of the first generation of German sociologists. Other social scientists explored behaviors related to herding, such as Freud (crowd psychology), Carl Jung (collective unconscious), and Gustave Le Bon (the popular mind). Sigmund Freud (ˈziːkmʊnt ˈfʁɔʏt born Sigismund Shlomo Freud (May 6 1856 &ndash September 23 1939 was an Austrian Psychiatrist who founded Gustave Le Bon ( May 7, 1841 &ndash December 13, 1931) was a French Social psychologist, Sociologist, and amateur 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. Technical analysis is a Financial markets technique that claims the ability to forecast the future direction of security prices through the study of past market Market sentiment is the general feeling or mood of the Investment community as to the anticipated price movement of the stock market. [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. Behavioral economics and behavioral finance are closely related fields which apply scientific research on human and social cognitive and emotional factors to better Robert James "Bob" Shiller (born 1946 is an American economist academic and best-selling author Vernon Lomax Smith (born January 1, 1927) is professor of Economics at Chapman University School of Law and School of Business in Orange Amos Nathan Tversky, PhD (עמוס טברסקי March 16, 1937 - June 2, 1996) was a cognitive and mathematical psychologist Daniel Kahneman (דניאל כהנמן (born 5 March 1934 is an Israeli American psychologist and Nobel laureate, notable for his work on

Hey and Morone (2004) analysed a model of herd behaviour in a market context. Their work is related to at least two important strands of literature. The first of these strands is that on herd behaviour in a non-market context. The seminal references are Banerjee (1992) and Bikhchandani, Hirshleifer and Welch (1992), both of which showed that herd behaviour may result from private information not publicly shared. More specifically, both of these papers showed that individuals, acting sequentially on the basis of private information and public knowledge about the behaviour of others, may end up choosing the socially undesirable option. The second of the strands of literature motivating this paper is that of information aggregation in market contexts. A very early reference is the classic paper by Grossman and Stiglitz (1976) that showed that uninformed traders in a market context can become informed through the price in such a way that private information is aggregated correctly and efficiently. A summary of the progress of this strand of literature can be found in the paper by Plott (2000). Hey and Morone (2004) showed that it is possible to observe herd-type behaviour in a market context. Their result is even more interesting since it refers to a market with a well-defined fundamental value. Even if herd behaviour might only be observed rarely, this has important consequences for a whole range of real markets – most particularly foreign exchange markets.

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. The New York Draft Riots (July 11 to July 16 1863 known at the time as Draft Week) were violent disturbances in New York City that were the culmination The 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 massacre S. history, but those episodes are dwarfed by the scale of violence and death during the Partition of India. The Partition of India was the partition of the British Indian Empire which led to the creation on August 14, 1947 and August 15, 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. This article is about the country For a topic outline on this subject see List of basic France topics. Jean-Gabriel De Tarde or Gabriel Tarde in short ( March 12, 1843 in Sarlat, France &ndash May 13, 1904 Gustave Le Bon ( May 7, 1841 &ndash December 13, 1931) was a French Social psychologist, Sociologist, and amateur

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 Nika riots (Στάση του Νίκα or Nika revolt, took place over the course of a week in Constantinople in 532. Constantinople (Κωνσταντινούπολις Konstantinoúpolis, or gr ἡ Πόλις hē Polis, Latin: la CONSTANTINOPOLIS The football hooliganism of the 1980s was a well-publicized, latter-day example of sports violence. Football hooliganism such as brawls vandalism and intimidation carried out by Association football club supporters and fans

Everyday decision-making

Benign herding behaviors may be frequent in everyday decisions based on learning from the information of others, as when a person on the street decides 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. This phenomenon is also referred to as an information cascade. [5] [6]

See also

References

  1. ^ a b W. Anxiety is a physiological and psychological state characterized by Cognitive, Somatic, Emotional and Behavioral components The bandwagon effect, also known as Social proof or "cromo effect" and closely related to opportunism, is the observation that people often do and believe The term " collective behavior " was first used by Robert E Collective consciousness refers to the shared beliefs and moral attitudes which operate as a unifying force within society Collective effervescence (CE is a perceived Energy formed by a gathering of people as might be experienced at a sporting event a Carnival, a Rave, or Collective intelligence is a shared or group Intelligence that emerges from the collaboration and competition of many individuals Crowd psychology, or social facilitation theory, is a branch of Social psychology. Conformism is a term used to describe the suspension of an individual's self-determined actions or opinions in favor of Obedience to the mandates or conventions Fear is an Emotional response to Threats and Danger. It is a basic survival mechanism occurring in response to a specific Stimulus, such as Flocking - the collective motion of a large number of self-propelled entities - is a behaviour exhibited by many living beings such as birds Fish, Bacteria Group behavior in Sociology refers to the situations where people interact in large or Small groups The field of Group dynamics deals with Groupthink is a type of thought exhibited by group members who try to minimize conflict and reach consensus without critically testing analyzing and evaluating ideas Herd mentality describes how people are influenced by their peers to adopt certain behaviors follow trends and/or purchase items In Game theory, an information cascade or informational cascade is a situation in which every subsequent actor based on the observations of others makes the same Mass hysteria, also called collective hysteria, mass psychogenic illness, or collective obsessional behavior, is the sociopsychological Mean World Syndrome is a Phenomenon whereby the violence-related content of Mass media convinces viewers that the world is more dangerous than it actually is and A meme (miːm consists of any idea or behavior that can pass from one person to another by learning or imitation Ochlocracy ( Greek: οχλοκρατία or okhlokratía; Latin: ochlocratia) is government by mob or a mass of people A moral panic can be defined as "the intensity of feeling expressed by a large number of people about a specific group of people who appear to threaten the social order at a given Propaganda is a concerted set of messages aimed at influencing the opinions or behaviors of large numbers of people Self-organization is a process of Attraction and repulsion in which the internal organization of a System, normally an open system, increases Sheeple is a Term of disparagement, a Portmanteau created by combining the words " Sheep " and " people. Robert R Prechter Jr (born 1949 is an American Author and stock market analyst known for his financial forecasts using the Elliott Wave principle. See also the closely related articles Emergence and Self-organization. Swarm intelligence (SI is Artificial intelligence based on the Collective behavior of decentralized, self-organized systems Symmetry breaking in herding behavior Asymmetric aggregation of animals under panic conditions has been observed in many species including humans mice and ants A general dictionary defines teamwork as a " Cooperative or coordinated effort on the part of a group of persons acting together as a team or in the interests of a common 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.
  6. ^ Sushil Bikhchandani, David Hirshleifer, Ivo Welch. October 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades. " Journal of Political Economy, Vol. 100, No. 5, pp. 992-1026.

Further reading

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