Hi Elliott Waver, Herding in finance is detrimental. But nearly all financial market participants do it. Take a look at this figure. |
The lower graph shows that the general investing population commits more money to the market as it rises and less as it falls – the exact opposite of what would generate profits. Surprisingly, even professionals fall into the same trap. The middle graph shows that the percentage of cash held at institutions moves roughly together with the S&P 500 Composite Index. Institutional portfolio managers herd in the market’s direction for the most part right along with the public. |
