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Availability Cascade and Herd Behavior in Financial Markets

Availability Cascade and Herd Behavior in Financial Markets
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Author(s): Eren Kırmızıaltın (Sinop University, Turkey)and Duygu Çeri (Sinop University, Turkey)
Copyright: 2025
Pages: 30
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.ch002

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Abstract

Herd behavior is important topics in behavioral finance. In financial markets, herd behavior occurs when investors follow the crowd, making decisions based on current trends or the actions of others rather than conducting their own thorough analysis. This behavior, combined with market overreaction plays a significant role in price volatility and financial instability. To analyze these behaviors effectively, it's essential to understand the underlying mechanisms, particularly the psychological and cognitive factors that drive them. This study focuses on the connection between herd behavior and the availability cascade. Given the focus of this study, the analysis has been tailored to explore this relationship specifically. Consequently, the study not only focuses on the psychological and cognitive factors that cause herding behavior in financial markets but also tries to explain the relationship between the psychological and cognitive factors that cause herding behavior and the availability cascade.

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