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Artificial Intelligence in Detecting Herding and Market Overreaction: Specifying Impact of Behaviors on Market Dynamics

Artificial Intelligence in Detecting Herding and Market Overreaction: Specifying Impact of Behaviors on Market Dynamics
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Author(s): Bhupinder Singh (Sharda University, India), Christian Kaunert (Dublin City University, Ireland)and Ritu Gautam (Sharda University, India)
Copyright: 2025
Pages: 22
Source title: Psychological Drivers of Herding and Market Overreaction
Source Author(s)/Editor(s): Ooi Kok Loang (University of Malaya, Malaysia)
DOI: 10.4018/979-8-3693-7827-4.ch001

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Abstract

Herding behavior, where individuals in a group act collectively without centralized direction, is a phenomenon observed in various domains, including financial markets, consumer behavior and social media trends. Detecting herding behavior is crucial for understanding market dynamics, predicting economic crises, and managing risks. Artificial Intelligence (AI) has emerged as a powerful tool in identifying and analyzing herding patterns due to its ability to process vast amounts of data and uncover complex patterns that are not easily visible through traditional methods. The future of AI in this industry is optimistic, with continued developments promising even higher efficiency and accuracy, despite the limitations. AI will grow more sophisticated in its application to herding behavior detection as it develops, enabling more informed risk management and decision-making. This chapter explores the role of AI in detecting herding, highlighting its applications, benefits, challenges and future prospects.

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