herding

Herding refers to the behavior of individuals following the actions of others rather than relying on their own information or judgment. The term is used across disciplines, including animal behavior, sociology, and finance.

In animals, herding describes groups of animals moving together for safety and efficiency. Herds form in many species. Benefits include improved detection of predators, enhanced foraging efficiency, and safety in numbers. Mechanisms include social influence, local enhancement, and collective decision making. Herds can exhibit emergent properties such as synchronized movement and rapid shifts in direction.

In humans, herding describes a tendency to imitate the choices of others under uncertainty, especially when personal information is weak or costly to obtain. It can be influenced by social influence, reputational concerns, and risk aversion. It may lead to rapid convergence on a trend or belief, regardless of its intrinsic merit.

In financial markets, investor herding can cause price movements to diverge from fundamentals and contribute to bubbles or crashes. The concept is studied via models of informational cascades and bounded rationality. Classic theories by Banerjee (1992) and Bikhchandani, Hirshleifer, and Welch (1992) describe how individuals may ignore private information when others' actions seem to convey information. Empirical evidence is mixed, with some periods or markets showing stronger herding signals than others.

Herding is a broad concept with relevance to ecology, economics, marketing, and social dynamics. Understanding its drivers helps explain why groups sometimes act cohesively and sometimes diverge from individual assessments.