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Bad advice, herding and bubbles

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  • Mark Thoma

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.

Suggested Citation

  • Mark Thoma, 2013. "Bad advice, herding and bubbles," Journal of Economic Methodology, Taylor & Francis Journals, vol. 20(1), pages 45-55.
    • Handle: RePEc:taf:jecmet:v:20:y:2013:i:1:p:45-55
    DOI: 10.1080/1350178X.2013.774850
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    References listed on IDEAS

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