Thoughts about social influences in stock market

Blog assignment 3

During this course I have been given the opportunity to read the book, Social Influences In Stock Market by Maria Andersson at University of Gothenburg.

The shares prospective yield could be guided by all kinds of information that is available to the financial markets all over the world. The problem is that not all information is reliable. When the information tend to be insecure, the investors gathers and make a herd.

My point of view in this blog assignment is about herding regarding financial investments.

The behaviour on the stock market is mostly based on Informative social influence.

Informative social influence is when others decisions seams to be evidence in what is correct, and then act like a herd.

I will not comment the experimental studies that have been made in this book. I will instead reflect over herding and its acting’s on the financial market.

When you think about it, the financial market is based on the information flow and its speculations. But what if you have based your acting on others information and there reliability? You will get a herding behaviour. And when you so badly starring you blind in that you will someway distort or miss a part of very important information that would make a huge impact on your acting and decisions. When a market and its herd never stops and reflect you will see bad things happen.

Someone always make money on the herds acting, my point of view is that there mostly is the “svenssons” that takes the hit. The often hear on the news or read in the paper that a particular segment is hot and on the move, and then make a decision to enter the market and buy a particular share. When they do so, they also have to consider that someone is leaving, selling that share and probably makes a profit.

The financial market is based on speculations and information but I think that the herd and its actions never can be good in the long run, because you always will be missing something on the way that is of significant impairment.

I´ve found a quote that really got stuck in my head after reading this book,

“When people are free to do as they please, they usually imitate each other” (Eric Hoffer)

And it immediately got me thinking about, what if you act completely opposite of the herd would you make a better profit outside or inside the herd?

This question is worthy of thinking and a will surly give it a second thought I the future.

Social Influence in Stock Markets 

ISSN: 1101-718X

ISBN: 978-91-628-7851-1