Herd Behavior: Safety in Numbers

Thomas Palley

Chapter 6 in Financialization, 2013, pp 105-111 from Palgrave Macmillan

Abstract: Abstract The financial crisis of 2008 revealed the fragility of financial systems. One cause of that fragility may have been herd behavior on the part of financial market participants that had all adopted common behaviors and investment strategies. Evidence for such behavior is provided by former Citigroup CEO Chuck Prince’s comments about investing in mortgage-backed securities, including sub-prime loans: When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing. (Financial Times, July 9, 2007)

Keywords: Reward Function; Herd Behavior; Average Allocation; Instability Hypothesis; Comparative Statics Exercise (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-26582-1_6

Ordering information: This item can be ordered from
http://www.palgrave.com/9781137265821

DOI: 10.1057/9781137265821_6

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().