How can herd behavior lead to a bubble in a financial market

Reference no: EM131305307

1. What is noise trading?

2. What is herd behavior, and how can it lead to a bubble in a financial market?

3. Some mutual funds have started behavioral finance funds that attempt to use insights from behavioral finance in choosing stocks. According to an article in the New York Times, "Emotions cause investors to misjudge the impact of events in systematic ways. . . . Identifying those patterns and trading against them, the [fund] managers say, allows them to enhance performance." Is the strategy these fund managers are using consistent with the efficient markets hypothesis?

Reference no: EM131305307

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