The term 'herd behaviour' refers to

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BlackTom AI · Accepted Answer

The question asks about the meaning of the term 'herd behaviour' in the context of fund managers and investment choices.
Option a: 'the way in which funds use fee structures to group customers together' This describes pricing or marketing strategies, not herd behaviour. It confuses execution context with handling of customer segmentation, so this is not an accurate definition of herd behaviour.
Option b: 'the tendency for different fund managers to adopt the same portfolio mix' This captures the essence of herd behaviour in finance, where managers imitate others' choices or popular trends rather than acting independently on original analyses. It reflects social influence leading to convergence in decisions.
Option c: 'None of these' This would be chosen only if all provided statements were incorrect. Since option b correctly describes herd behaviour, this option is not accurate.
Option d: 'the way in which returns on various investment classes tend to converge' This describes convergence of outcomes across asset classes, not the social/behavioral imitation among managers. It’s a different phenomenon (return convergence) and does not explain herd behaviour in manager choices.
In summary, the definition best aligned with herd behaviour in this setting is the imitation or alignment of portfolio choices among different fund managers, which corresponds to option b. The other options either describe pricing/marketing, results phenomena, or none of the above, none of which accurately capture the concept as used in this context.

The term 'herd behaviour' refers to

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