Psychological and Economic Theories of Herd Behavior and Applications Thereof for the Explanation of the Herd Behavior in the Financial Markets

Abstract

The article describes the development of the sociological and economic theories of herd behavior and discusses their applicability for the explanation of the phenomenon of herd behavior in the financial markets. This article is the second one in the series of three publications devoted to the theoretical foundations of the financial bubbles. The first article dealing with the psychological theories is published in the e-journal The Corporate Finance, vol. 13, №1, 2010.