The Vulnerability of Small Investors and the Impact of Herd Behavior on Market Volatility

The Vulnerability of Small Investors and the Impact of Herd Behavior on Market Volatility

We discuss how small investors, who make up a large portion of the market, are particularly susceptible to losses from stock price fluctuations. They often lack the financial expertise and insider information necessary to properly evaluate risk, leaving them highly vulnerable in less transparent markets. The herd behavior strategy, derived from the animal world, is similar to animals gathering for prediction by moving in the same direction. In the securities market, this behavior leads to an increase in selling when prices fall and more buying when prices rise. Small investors also tend to imitate prominent traders or major financial institutions, further contributing to market volatility.

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