The term 'herd behaviour' refers to

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BlackTom AI · Accepted Answer

The question asks: The term 'herd behaviour' refers to

The provided data shows an answer label: 'd. the tendency for different fund managers to adopt the same portfolio mix'.

However, no answer options were actually supplied in the 'answer_options' field, so we cannot compare multiple choices. Despite that, we can explain the concept in general terms and why the given option aligns with the standard meaning of herd behaviour in finance.

Herd behaviour in finance refers to the phenomenon where investors or fund managers mimic the actions of a larger group, often without independent analysis. This can lead to several participants buying or selling the same assets, resulting in a convergence of portfolio holdings or market moves that are driven by social or reputational factors rather than fundamentals.

Why the stated option fits the concept: If 'the tendency for different fund managers to adopt the same portfolio mix' is the described statement, it captures the essence of herd behaviour as imitation or following the crowd in portfolio construction. This aligns with the idea that individuals in a market maynot all independently evaluate every asset, but rather follow perceived consensus or actions of peers, fund families, or market leaders.

Why this could be considered incomplete or context-dependent: In some definitions, herd behaviour also encompasses investor reactions to news, mispricing, or fear of missing out, not solely a mechanical alignment of portfolio mixes. Additionally, herd behaviour can occur at various decision levels beyond fund managers’ portfolios, including individual investors or institutional traders.

Given that the options are missing, we cannot critique alternative statements. If options were provided, we would assess each for alignment with the core notion that herd behaviour involves copying or following the actions of others rather than independent, information-based decision making.

MCD2170 - T1 - 2025 Week 10 post class homework

The term 'herd behaviour' refers to

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