During a bull run in the stock market, shares of a newly

Solution

Herding bias is the human tendency to mimic the actions, decisions, or beliefs of a larger group, often driven by social pressure, instinct, or the assumption that the crowd knows best, leading to potentially irrational choices in areas like investing (e.g., market bubbles, meme stocks), shopping, or even simple social behaviors. It's also known as herd mentality and involves following the "herd" without independent analysis, which can cause panic buying/selling or neglecting fundamental research.     In the above case,  i nvestors are  copying the actions of others rather than relying on their own judgment.  Their d ecisions are driven by crowd behaviour  based on the assumption that they know something that you do not know yet .   This is the classic definition of  herding  in behavioural finance.     Kindly note,   Herding is similar to  the bandwagon effect  but not exactly same. While Bandwagon effect is  mostly about following something because of its popularity or  trend , driven by fear of missing out on the trend;  Herding is more about following others without own research  with a belief that others know something, you do not know yet. As such, herding is more common in financial markets.