Distinguishing True Herding from “Spurious Herding”.
It’s important to differentiate true herd mentality (where individuals copy others’ actions regardless of their own information) from “spurious herding.”
Spurious herding occurs when many individuals make similar decisions because they are reacting to the same commonly known public information (e.g., a central bank raising interest rates, leading many investors to sell bonds).
In this case, they are not necessarily copying each other, but rather acting independently based on shared, relevant data.
However, in practice, it can be difficult to empirically distinguish between the two.
