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Placeholder Lesson:
** This lesson is generated with AI assistance and approved by Danny Nelson. This lesson will communicate the essence of the topic for now until Danny can create a full lesson. **
Herding bias happens when individuals follow the actions of a larger group, even if those actions are irrational.
People naturally feel safer doing what everyone else is doing.
In financial markets, herding can lead to bubbles and crashes because many people buy or sell at the same time.
The behavior reduces independent thinking and analysis.
Ultimately, herding causes people to act based on fear of missing out rather than sound reasoning.