Wisdom of Crowds or Groupthink: Analyzing the financial system collapse (Part II of II)

Continued from Part I. If the crowds of investors were not all that wise during the recent market cycle what is another possible explanation for the behavior driving the markets? Herd Mentality is used to describe how people and businesses are influenced by those around them when making decisions. People may act in conjunction with [...]

Wisdom of Crowds or Groupthink: Analyzing the financial system collapse (Part I of II)

In light of the recent collapse in worldwide financial markets this post will attempt to analyze two somewhat contradictory theories of behavior and how they relate to investors and markets in general. The two theories are wisdom of the crowds, individuals arriving at a decision independently where the average group decision is best, and groupthink, [...]