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

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

Authors
Yudie Xu1, *
1Shanghai Australian International School, Shanghai, China
*Corresponding author. Email: xuyudie2005@icloud.com
Corresponding Author
Yudie Xu
Available Online 15 May 2023.
DOI
10.2991/978-94-6463-142-5_25How to use a DOI?
Keywords
Herd mentality; incomplete information; speculation
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.

Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 8th International Conference on Financial Innovation and Economic Development (ICFIED 2023)
Series
Advances in Economics, Business and Management Research
Publication Date
15 May 2023
ISBN
10.2991/978-94-6463-142-5_25
ISSN
2352-5428
DOI
10.2991/978-94-6463-142-5_25How to use a DOI?
Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Yudie Xu
PY  - 2023
DA  - 2023/05/15
TI  - Behavioral Finance: An Introduction of Herd Effect - Take the Dotcom Bubble in 2000s as an Example
BT  - Proceedings of the 8th International Conference on Financial Innovation and Economic Development (ICFIED 2023)
PB  - Atlantis Press
SP  - 216
EP  - 224
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-142-5_25
DO  - 10.2991/978-94-6463-142-5_25
ID  - Xu2023
ER  -