Bad advice, herding and bubbles

Mark Thoma

Journal of Economic Methodology, 2013, vol. 20, issue 1, 45-55

Abstract: Prior to the crash of the housing market, many experts told the public that the upward trend in housing prices was not a bubble, it could be explained by fundamentals. This paper shows that an increase in the propensity of individuals to herd toward trend-chasing behavior caused, for example, by bad advice from experts, increases the likelihood that a destructive bubble will occur.

Date: 2013
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DOI: 10.1080/1350178X.2013.774850

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