Herding/bandwagon effect and overreaction towards new inform

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Reference no: EM13153654

Please write one page on each of these two topics.

Herding/Bandwagon Effect: This is the tendency for individual traders to mimic the actions (rational or irrational) of the market. Individually, the trader would not necessarily have made the same choice.

and

Overreaction towards new information: According to market efficiency, new information should be reflected instantly in a currency's price. For example, good news should raise a currency's price accordingly, and that gain in price should not decline if no new information has been released since. Usually traders overreact to new information, creating a larger-than-appropriate effect on the currency's price.

Reference no: EM13153654

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