This paper provides a comprehensive review of herding behavior in financial markets, with a specific focus on the social factors that influence such collective decision-making. Herding occurs when investors mimic the actions of others rather than relying on their own analysis or private information. While traditional models emphasize informational cascades or rational herding, growing evidence highlights the role of social dynamics such as peer pressure, conformity, media influence, reputation concerns, and behavioral contagion. Drawing from a broad range of empirical studies and theoretical frameworks, this review explores the manifestations of herding across different investor groups, market conditions, and geographical regions. Particular attention is paid to the contrast between developed and emerging markets, and between individual and institutional investors. The study reveals that social herding is not only a reflection of bounded rationality but also a socially reinforced behavior that undermines market efficiency and can contribute to volatility and systemic risk. The paper concludes by identifying gaps in the current literature and proposing directions for future research, especially in the context of digital trading environments and algorithmic decision-making.
Gupta et al. (Fri,) studied this question.