Herd mentality rules in financial crisis (Reuters)

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MrMark
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30 Sep 2008, 1:58 pm

Herd mentality rules in financial crisis

By Maggie Fox, Health and Science Editor

WASHINGTON (Reuters) - Herd mentality rules during a financial crisis because people are wired to follow the crowd when times are uncertain, experts say.

Brain and behavior studies clearly show that when information is scarce and threats seem imminent, people often stop listening to their own logic and look to see what others are doing.

"People are afraid, and the reason they are afraid is there tremendous uncertainty right now in the markets," Gregory Berns, a neuroeconomist at Emory University in Atlanta who studies the biology of economic behavior, said in a telephone interview.

http://news.yahoo.com/s/nm/20080930/lf_ ... psychology

Neuroeconomist. Wow. That's what I want to be when I grow up.


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caramateo
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30 Sep 2008, 2:12 pm

Funny thing, I just read this article and thought about how me being an aspie makes me be different. I've never had the "herd" mentality. I prefer to act by logic and reasoning first.
Most people don't get me until they see (if they ever) what I'm talking about.



pbcoll
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30 Sep 2008, 2:21 pm

Yet the most fundamental assumption in economics is that people are rational...
Following the herd in times of crisis makes sense when running away from tigers, but is not rational in finance.

Nice avatar, caramateo.


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anna-banana
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30 Sep 2008, 2:36 pm

I don't get this. isn't herd mentality supposed to be something you don't conciously think about, like you see people running away so you start running too (I only know the theory too)?

Quote:
Zak knows what he is doing. "I am buying stocks," he said.


that's what I would do if I had a spare dollar...


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