# Herding

*Behavioral Finance — Finicade finance glossary*

Herding is following the crowd rather than your own analysis — individually rational when being wrong alone is punished harder than being wrong together.

Herding is following the crowd rather than your own analysis, and it can be individually rational even when it's collectively destructive: career risk means being wrong alongside everyone else is far safer than being wrong alone. It's the mechanism behind bubbles, bank runs and crowded trades, and it's why the most uncomfortable positions are frequently the best-compensated ones.

**Also known as:** herd behaviour, crowd following, groupthink

**Related terms:** [FOMO](https://finicade.com/glossary/fomo), [Meme Stock](https://finicade.com/glossary/meme-stock), [Bank Run](https://finicade.com/glossary/bank-run), [Behavioral Biases](https://finicade.com/glossary/behavioral-biases), [Market Efficiency](https://finicade.com/glossary/market-efficiency)

**Taught in:** Charter Climb — Behavioral Finance & Fintech

Source: https://finicade.com/glossary/herding