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RETRACTED CHAPTER: Behavioral Finance: An Introduction of Herd Effect - Take the Dotcom Bubble in 2000s as an Example

In: Proceedings of the 8th International Conference on Financial Innovation and Economic Development (ICFIED 2023)

Author

Listed:
  • Yudie Xu

    (Shanghai Australian International School)

Abstract

This essay introduces the formation of behavioral finance, which considers psychological factors on investor’s behaviors to explain anomalies in the traditional finance. Using the first market bubble — tulip mania in 17 century as an example to see how irrational behavior affects the stock market. The essay studies the herd effect, which was the main reason causing the market to collapse, in behavioral finance. It explains the origin and three reasons: incomplete information, reputation and speculation which forms the herd mentality. It focuses on how herd mentality affects investors’ decision making in the stock market. Then using the dot com bubble in 2000s as the main example to further find out the real impact of herd effect on investors’ purchasing craze leading to market bubbles. It has also mentioned the cryptocurrency bubble in recent days which indicates that the market bubble is likely to be repeated in the future.

Suggested Citation

  • Yudie Xu, 2023. "RETRACTED CHAPTER: Behavioral Finance: An Introduction of Herd Effect - Take the Dotcom Bubble in 2000s as an Example," Advances in Economics, Business and Management Research, in: Yushi Jiang & Guangming Li & Wilson Xinbao Li (ed.), Proceedings of the 8th International Conference on Financial Innovation and Economic Development (ICFIED 2023), pages 216-224, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-142-5_25
    DOI: 10.2991/978-94-6463-142-5_25
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